UniCredit S.p.A. (incorporated with limited liability as a "Società per Azioni" under the laws of the Republic of Italy)

Transcription

1 UniCredit S.p.A. (incorporated with limited liability as a "Società per Azioni" under the laws of the Republic of Italy) 20,000,000,000 Obbligazioni Bancarie Garantite Programme Guaranteed by UniCredit BpC Mortgage S.r.l. (incorporated with limited liability as a "Società a responsabilità limitata" under the laws of the Republic of Italy) Under the 20,000,000,000 Obbligazioni Bancarie Garantite Programme (the Programme ) described in this prospectus (the Prospectus ), UniCredit S.p.A. (in its capacity as issuer of the OBG, as defined below, the Issuer ), subject to compliance with all relevant laws, regulations and directives, may from time to time issue obbligazioni bancarie garantite (the OBG which term includes, for the avoidance of doubt, Registered OBG, as defined below) guaranteed by UniCredit BpC Mortgage S.r.l. (the OBG Guarantor ) pursuant to article 7 bis of Italian law No. 130 of 30 April 1999 (Disposizioni sulla cartolarizzazione dei crediti), as amended from time to time (the Law 130 ) and regulated by the Decree of the Ministry of Economy and Finance of 14 December 2006, No. 310, as amended from time to time (the MEF Decree ) and the supervisory guidelines of the Bank of Italy of 17 May 2007, as amended from time to time (the BoI OBG Regulations ). The payment of all amounts due in respect of the OBG will be unconditionally and irrevocably guaranteed by the OBG Guarantor. Recourse against the OBG Guarantor is limited to the the Available Funds (both as defined below). The maximum aggregate nominal amount of OBG from time to time outstanding under the Programme will not at any time exceed 20,000,000,000 (or its equivalent in other currencies calculated as described herein), subject to increase as provided for under the Dealer Agreement. The OBG issued under the Programme (other than Registered OBG) will have a minimum denomination of 100,000 and integral multiples of 1,000 in excess thereof (or, if the relevant Series of OBG is denominated in a currency other than euro, the equivalent amount in such currency) or such other higher denomination as may be specified in the relevant Final Terms (or its equivalent in another currency as at the date of issue of the relevant Series of OBG). OBG may be issued in dematerialised form or in registered form also as German law governed registered covered bonds (Namensschuld verschreibung) (the Registered OBG ). The terms and conditions of the relevant Registered OBG (the Registered OBG Conditions ) will specify the minimum denomination for the relevant Registered OBG, which will not be listed. The OBG may be issued on a continuing basis to the Dealer(s) appointed under the Programme in respect of the OBG from time to time by the Issuer (each a Dealer and together the Dealers ), the appointment of which may be for a specific issue or on an ongoing basis. References in this Prospectus to the relevant Dealer shall, in the case of an issue of OBG being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to subscribe such OBG. This Prospectus constitutes a base prospectus for the purposes of article 5.4 of Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 (the Prospectus Directive ) and the relevant implementing measures in the Grand Duchy of Luxembourg. This Prospectus will be available on the Luxembourg Stock Exchange website at This Prospectus has been approved by the Commission de Surveillance du Secteur Financier (the CSSF ), which is the Luxembourg competent authority for the purposes of the Prospectus Directive and relevant implementing measures in Luxembourg, as a base prospectus issued in compliance with the Prospectus Directive and relevant implementing measures in Luxembourg for the purposes of giving information with regard to the issue of OBG under the Programme during the period of twelve (12) months after the date hereof. Application has also been made to the Luxembourg Stock Exchange for the OBG (other than the Registered OBG) issued under the Programme to be admitted during the period of 12 months from the date of this Prospectusto the official list of the Luxembourg Stock Exchange (the Official List ) and to be admitted to trading on the Luxembourg Stock Exchange s regulated market. References in this Prospectus to OBG being listed (and all related references) shall mean that such OBG (other than the Registered OBG) have been admitted to the Official List and admitted to trading on the Luxembourg Stock Exchange s regulated market. The Luxembourg Stock Exchange s regulated market is a regulated market for the purposes of Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments. However, unlisted OBG may be issued pursuant to the Programme. The relevant Final Terms (as defined below) in respect of the issue of any OBG (other than the Registered OBG) will specify whether or not such OBG will be listed on the Official List and admitted to trading on the Luxembourg Stock Exchange s regulated market (or any other stock exchange). Application may also be made for notification to be given to competent authorities in other Member States of the European Economic Area in order to permit OBG (other than the Registered OBG) issued under the Programme to be offered to the public and admitted to trading on regulated markets in such other Member States in accordance with the procedures under the Prospectus Directive. Each Series or Tranche (as defined herein) of OBG may be issued without the consent of the holders of any outstanding OBG, subject to certain conditions. OBG of different Series or Tranche may have different terms and conditions, including, without limitation, different maturity dates. Notice of the aggregate nominal amount of OBG, interest (if any) payable in respect of OBG, the issue price of OBG and any other terms and conditions not contained herein which are applicable to each Series or Tranche will be set out in final terms (the Final Terms ) which, with respect to OBG to be listed on the Luxembourg Stock Exchange, will be delivered to the Luxembourg Stock Exchange on or before the date of issue of the OBG of such Series or Tranche. The OBG will be issued in dematerialised form (emesse in forma dematerializzata) will be subject to the terms ofthe Terms and Conditions of the OBG and the applicable Final Terms and will be held in such form on behalf of the beneficial owners, until redemption and cancellation thereof, by Monte Titoli S.p.A. with registered office at via Mantegna, 6, Milan, Italy ( Monte Titoli ) for the account of the relevant Monte Titoli Account Holders. The expression Monte Titoli Account Holders means any authorised financial intermediary institution entitled to hold accounts on behalf of their customers with Monte Titoli (and includes any Relevant Clearing System which holds account with Monte Titoli or any depository banks appointed by the Relevant Clearing System). The expression Relevant Clearing Systems means any of Clearstream Banking, société anonyme ( Clearstream, Luxembourg ) and Euroclear Bank S.A./N.V. as operator of the Euroclear System ( Euroclear ). The OBG of each Series or Tranche, issued in dematerialised form, will be deposited by the Issuer with Monte Titoli on the relevant Issue Date (as defined herein), will be in bearer form, will be at all times be in book entry form and title to the relevant OBGof each Series or Tranche will be evidenced by book entry in accordance with the provisions of article 83-bis of Italian legislative decree No. 58 of 24 February 1998, as amended and supplemented (the Financial Services Act ), and with regulation issued by the Bank of Italy and the Commissione Nazionale per le Società e la Borsa ( CONSOB ) on 22 February 2008, as subsequently amended. No physical document of title will be issued in respect of the OBG of each Series or Tranche. Each Series or Tranche of OBG may be assigned, on issue, a rating by one or more of Fitch Ratings Limited ( Fitch ), Moody's Investors Service Inc. ( Moody s ) and Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ( S&P and, together with Fitch and Moody's, the Rating Agencies, which expression shall include any successor). OBG to be issued under the Programme, if rated, are expected to be rated Aaa by Moody's, AAA by S& and AAA by Fitch. Where a Tranche or Series of OBG is to be rated, such rating will not necessarily be the same as the rating assigned to the OBG already issued. Whether or not a rating in relation to any Tranche or Series of OBG will be treated as having been issued by a credit rating agency established in the European Union and registered under Regulation (EC) No 1060/2009 on credit rating agencies (the CRA Regulation ) will be disclosed in the relevant Final Terms. The credit ratings included or referred to in this Prospectus have been issued by Fitch, Moody s or S&P, each of which is established in the European Union and each of which has applied to be registered under the CRA Regulation. Conditions precedent to the issuance of any Series or Tranche include that S&P confirms (where applicable) that the issuance of such Series or Tranche will not result in a reduction or withdrawal of the then current ratings by S&P of any of the then outstanding Series or Tranches. A credit rating is not a recommendation to buy, sell or hold OBG and may be subject to revision, suspension or withdrawal by any or all of the Rating Agencies and each rating shall be evaluated independently of any other. The OBG of each Series or Tranche will mature on the date mentioned in the applicable Final Terms (each a Maturity Date ). Before the relevant Maturity Date, the OBG of each Series or Tranche will be subject to mandatory and/or optional redemption in whole or in part in certain circumstances (as set out in the Conditions (as defined below)). Subject to certain exceptions as provided for in Condition 11 (Taxation), payments in respect of the OBG to be made by the Issuer will be made without deduction for or on account of withholding taxes imposed by any tax jurisdiction. In the event that any such withholding or deduction is made the Issuer will be required to pay additional amounts to cover the amounts so deducted. In such circumstances and provided that such obligation cannot be avoided by the Issuer taking reasonable measures available to it, the OBG will be redeemable (in whole, but not in part) at the option of the Issuer. See Condition 9(c). The OBG Guarantor will not be liable to pay any additional amount due to taxation reasons in case an Issuer Event of Default (as defined below) has occurred. See Taxation, below Prospective investors should have regard to the factors described under the section headed Risk Factors in this Prospectus. Sole Arranger UniCredit Bank AG, London Branch Dealer UniCredit Bank AG The date of this Prospectus is 31 January / / - 1 -

2 This Prospectus comprises a base prospectus for the purposes of article 5.4 of Directive 2003/71/EC (the Prospectus Directive ) and for the purpose of giving information with regard to the Issuer, the OBG Guarantor and the OBG which, according to the particular nature of the OBG, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the Issuer and of the OBG Guarantor and of the rights attaching to the OBG. The Issuer accepts responsibility for the information contained in this Prospectus other than the information (regarding the OBG Guarantor) for which the OBG Guarantor accepts responsibility (collectively with the Issuer, the Responsible Persons ). To the best of the knowledge of the Responsible Persons, having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. Subject as provided in the applicable Final Terms, the only persons authorised to use this Prospectus (and, therefore, acting in association with the Issuer) in connection with an offer of OBG are the persons named in the applicable Final Terms as the relevant Dealer(s). Copies of the Final Terms will be available from the registered office of the Issuer and the specified office set out below of the Paying Agent (as defined below) and on the website of the Luxembourg Stock Exchange ( This Prospectus is to be read in conjunction with any document incorporated herein by reference (see Documents Incorporated by Reference below). This Prospectus shall be read and construed on the basis that such documents are incorporated and form part of this Prospectus. Full information on the Issuer, the OBG Guarantor and any Series or Tranche of OBG is only available on the basis of the combination of the Prospectus, any supplements, the relevant Final Terms and the documents incorporated by reference. Unless otherwise defined in the relevant section of this Prospectus in which they are used, capitalised terms used in this Prospectus shall have the meaning ascribed to them in the section headed Terms and Conditions of the OBG below. For ease of reference, the section headed Index of Defined Terms below indicates the page of this Prospectus on which each capitalised term is defined. None of the Dealers or the Sole Arranger makes any representation, express or implied, or accepts any responsibility, with respect to the accuracy or completeness of any of the information in this Prospectus. Each potential purchaser of OBG should determine for itself the relevance of the information contained in this Prospectus and its purchase of OBG should be based upon such investigation as it deems necessary. None of the Dealers or the Sole Arranger undertakes to review the financial condition or affairs of the Issuer or the OBG Guarantor during the life of the arrangements contemplated by this Prospectus or by any supplement nor to advise any investor or potential investor in OBG of any information coming to the attention of any of the Dealers or the Sole Arranger. This Prospectus contains industry and customer-related data as well as calculations taken from industry reports, market research reports, publicly available information and commercial 2

3 publications. It is hereby confirmed that (a) to the extent that information reproduced herein derives from a third party, such information has been accurately reproduced and (b) insofar as the Responsible Persons are aware and are able to ascertain from information derived from a third party, no facts have been omitted which would render the information reproduced inaccurate or misleading. The following sources of information, among others, have been used: (i) (ii) (iii) (iv) Bank of Italy: data used for the Issuer s internal estimate of the market shares for loans and direct deposits held in Italy; data on the Italian banking market, in particular the number of active bank branches and financial promoters; Italian association of asset managers (Assogestioni - Associazione del Risparmio Gestito): data used for the Issuer s internal estimates of market shares in mutual funds in Italy; Fitch, Moody s and S&P: data and information used for the explanation of the factors addressed by the ratings assigned by each of the relevant Rating Agency; Italian Banking Association (ABI - Associazione Bancaria Italiana): data used for the Issuer s internal estimates of market shares in direct deposits in Italy. Commercial publications generally state that the information they contain originates from sources assumed to be reliable, but that the accuracy and completeness of such information is not guaranteed, and that the calculations contained therein are based on a series of assumptions. External data have not been independently verified by the Responsible Persons. No person has been authorised to give any information or to make any representation other than those contained in this Prospectus in connection with the issue or sale of the OBG and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, the OBG Guarantor or any of the Dealer(s) or the Sole Arranger (as defined in General Description of the Programme ). Neither the delivery of this Prospectus nor any sale made in connection herewith shall, under any circumstances, create any implication that there has been no change in the affairs of the Issuer or the OBG Guarantor since the date hereof or the date upon which this Prospectus has been most recently amended or supplemented or that there has been no adverse change in the financial position of the Issuer or the OBG Guarantor since the date hereof or the date upon which this Prospectus has been most recently amended or supplemented or that any other information supplied in connection with the Programme is correct as of any time subsequent to the date on which it is supplied or, if different, the date indicated in the document containing the same. Neither the delivery of this Prospectus nor the offering, sale or delivery of any OBG shall in any circumstances imply that the information contained herein concerning the Issuer and the OBG Guarantor is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Programme is correct as of any time subsequent to the date indicated in the document containing the same. The Dealer(s) and the Representative of the OBG Holders expressly do not undertake to review the financial condition or affairs of the Issuer or the OBG Guarantor during the life of the Programme or to advise any investor in the OBG of any information coming to 3

4 their attention. Investors should review, inter alia, the most recently published documents incorporated by reference into this Prospectus when deciding whether or not to purchase any OBG. Neither this Prospectus nor any other financial statements are intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation by any of the Issuer, the Sole Arranger, the OBG Guarantor or the Dealer(s) that any recipient of this Prospectus or any other financial statements should purchase the OBG. Each potential purchaser of OBG should determine for itself the relevance of the information contained in this Prospectus and its purchase of OBG should be based upon such investigation as it deems necessary. None of the Dealer(s) or the Sole Arranger undertakes to review the financial condition or affairs of the Issuer or the OBG Guarantor during the life of the arrangements contemplated by this Prospectus nor to advise any investor or potential investor in the OBG of any information coming to the attention of any of the Dealer(s) or the Sole Arranger. The distribution of this Prospectus and the offering or sale of the OBG in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer, the OBG Guarantor, the Dealer(s) and the Sole Arranger to inform themselves about and to observe any such restriction. The OBG have not been and will not be registered under the United States Securities Act of 1933 (the Securities Act ) or with any securities regulatory authority of any state or other jurisdiction of the United States and include OBG in bearer form that are subject to U.S. tax law requirements. Subject to certain exceptions, OBG may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons (as defined in the U.S. Internal Revenue Code of 1986, as amended, and regulations thereunder). For a description of certain restrictions on offers and sales of OBG and on distribution of this Prospectus, see Subscription and sale below. This Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuer, the OBG Guarantor or the Dealer(s) to subscribe for, or purchase, any OBG. This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any OBG in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Prospectus and the offer or sale of OBG may be restricted by law in certain jurisdictions. The Issuer, the OBG Guarantor, the Dealers, the Sole Arranger and the Representative of the OBG Holders do not represent that this Prospectus may be lawfully distributed, or that any OBG may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, unless specifically indicated to the contrary in the applicable Final Terms, no action has been taken by the Issuer, the OBG Guarantor, the Dealers, the Sole Arranger or the Representative of the OBG Holders which is intended to permit a public offering of any OBG outside Luxembourg or distribution of this Prospectus in any jurisdiction where action for that purpose is required. Accordingly, no OBG may be offered or sold, directly or indirectly, and neither this Prospectus nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Prospectus or any OBG may come must inform themselves 4

5 about, and observe, any such restrictions on the distribution of this Prospectus and the offering and sale of OBG. In particular, there are restrictions on the distribution of this Prospectus and the offer or sale of OBG in the United States, Japan and the European Economic Area (including the United Kingdom and the Republic of Italy). See also Subscription and Sale, below. Each initial and each subsequent purchaser of an OBG will be deemed, by its acceptance of such Note, to have made certain acknowledgements, representations and agreements intended to restrict the resale or other transfer thereof as described in this Prospectus and in any Final Terms and, in connection therewith, may be required to provide confirmation of its compliance with such resale or other transfer restrictions in certain cases. See Subscription and sale, below. In connection with the issue of any Series or Tranche under the Programme, the Dealer or Dealers (if any) named as the stabilising manager(s) (the Stabilising Manager(s) ) (or persons acting on behalf of any Stabilising Manager(s)) in the applicable Final Terms may over-allot the relevant Series or Tranche or effect transactions with a view to supporting the market price of the relevant Series or Tranche at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager(s) (or any person acting on behalf of any Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the OBG of the relevant Series or Tranche is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the relevant Series or Tranche and 60 days after the date of the allotment of the relevant Series or Tranche. Any stabilisation action or over-allotment must be conducted by the relevant Stabilising Manager(s) (or any person acting on behalf of any Stabilising Manager(s)) in accordance with all applicable laws and rules. All references in this Prospectus to: (i) Euro, and euro refer to the currency introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty establishing the European Community (signed in Rome on 25 March 1957), as amended; (ii) U.S.$ or U.S. Dollar are to the currency of the Unites States of America; (iii) or UK Sterling are to the currency of the United Kingdom; (iv) Italy are to the Republic of Italy; (v) laws and regulations are, unless otherwise specified, to the laws and regulations of Italy; and (vi) billions are to thousands of millions. Certain monetary amounts and currency translations included in this Prospectus have been subject to rounding adjustments; accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which preceded them. The language of this Prospectus is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law. The Sole Arranger is acting for the Issuer and no one else in connection with the Programme and will not be responsible to any person other than the Issuer for providing the protection afforded to clients of the Sole Arranger or for providing advice in relation to the issue of the OBG. 5

6 TABLE OF CONTENTS Page DOCUMENTS INCORPORATED BY REFERENCE... 7 STRUCTURE DIAGRAM RISK FACTORS GENERAL DESCRIPTION OF THE PROGRAMME DESCRIPTION OF THE ISSUER THE CREDIT AND COLLECTION POLICIES DESCRIPTION OF THE OBG GUARANTOR DESCRIPTION OF THE ASSET MONITOR CREDIT STRUCTURE ACCOUNTS AND CASH FLOWS USE OF PROCEEDS DESCRIPTION OF THE TRANSACTION DOCUMENTS SELECTED ASPECTS OF ITALIAN LAW TERMS AND CONDITIONS OF THE OBG RULES OF THE ORGANISATION OF THE OBG HOLDERS FORM OF FINAL TERMS KEY FEATURES OF REGISTERED OBG (NAMENSSCHULD VERSCHREIBUNG) TAXATION SUBSCRIPTION AND SALE GENERAL INFORMATION INDEX OF DEFINED TERMS

7 DOCUMENTS INCORPORATED BY REFERENCE This Prospectus should be read and construed in conjunction with the following documents (1) Issuer unaudited consolidated accounts in respect of the third quarter period ended 30 September 2010; (2) Issuer unaudited consolidated interim financial statements (including review report) in respect of the six months ended 30 June 2010; (3) Issuer audited consolidated annual financial statements (including the auditors report thereon and notes thereto) in respect of the year ended on 31 December 2008; (4) Issuer audited consolidated annual financial statements (including the auditors report thereon and notes thereto) in respect of the year ended on 31 December 2009; (5) OBG Guarantor annual financial statements in respect of the year ended on 31 December 2008; (6) OBG Guarantor annual financial statements (including the auditors report thereon and notes thereto) in respect of the year ended on 31 December 2009; (7) Issuer s current by-laws (statuto), which have been previously published or are published simultaneously with this Prospectus and which have been approved by the CSSF or filed with it. Such documents shall be incorporated in and form part of this Prospectus, save that any statement contained in a document which is incorporated by reference herein shall be modified or superseded for the purpose of this Prospectus to the extent that a statement contained herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this Prospectus. Copies of all documents incorporated herein by reference may be obtained without charge at the head office of the Issuer and the Luxembourg Listing Agent and may be obtained via the internet at the websites of the Issuer ( and the Luxembourg Stock Exchange ( Written or oral requests for such documents should be directed to the specified office of the Luxembourg Listing Agent. The table below sets out the relevant page references for (i) the Issuer s unaudited consolidated interim financial statements (including review report) in respect of the six months ended 30 June 2010 and the Issuer s unaudited consolidated accounts in respect of the third quarter period ended on 30 September 2010; (ii) the Issuer s audited consolidated statements for the financial years ended 31 December 2008, as set out in the Issuer s annual report; (iii) the Issuer s audited consolidated statements for the financial years ended 31 December 2009, as set out in the Issuer s annual report; (iv) the OBG Guarantor s audited statements for the financial years ended 31 December 2008, as set out in the OBG Guarantor s annual report; (v) the OBG Guarantor s audited statements for the financial years ended 31 December 2009, as set out in the OBG Guarantor s annual report; and (vi) the Issuer s current by-laws (statuto). Information contained in the 7

8 documents incorporated by reference other than information listed in the table below is for information purposes only, and does not form part of this Prospectus. Unaudited consolidated interim financial statements (including review report) in respect of the six months ended 30 June 2010 Document Information contained Page Unaudited consolidated interim financial statements (including review report) of the Issuer in respect of the six months ended 30 June 2010 Balance Sheet Income Statement 80 Cash Flow Statement (consolidated) Explanatory Notes Independent auditor s review report Unaudited consolidated accounts in respect of the third quarter period ended 30 September 2010 Document Information contained Page Unaudited consolidated accounts of the Issuer in respect of the third quarter period ended 30 September 2010 Balance Sheet 16 Income Statement 17 Audited consolidated annual financial statements of the Issuer for the financial year ended 31 December 2008 Documents Information contained Page Audited consolidated financial statements of the Issuer for the financial year ended 31 December 2008 Auditors report Balance Sheet Income Statement 141 Cash Flow Statement Notes to the consolidated accounts Report of the auditors on the financial statements of the Issuer as at 31 8

9 December 2008 Audited consolidated annual financial statements of the Issuer for the financial year ended 31 December 2009 Documents Information contained Page Audited consolidated financial statements of the Issuer for the financial year ended 31 December 2009 Auditors report Balance Sheet Income Statement 124 Cash Flow Statement Notes to the consolidated accounts Report of the auditors on the financial statements of the Issuer as at 31 December 2009 Audited annual financial statements of the OBG Guarantor for the financial year ended 31 December 2008 Documents Information contained Page Audited Financial statements of the OBG Guarantor for the financial year ended 31 December 2008 Balance Sheet 8 Income Statement 9 Cash Flow Statement Notes to the financial statements Report of the auditors on the financial 1-2 statements of the OBG Guarantor as at 31 December 2008 Audited annual financial statements of the OBG Guarantor for the financial year ended 31 December 2009 Documents Information contained Page Audited financial statements of the OBG Guarantor for the financial year ended 31 December

10 Auditors report Balance Sheet 8 Income Statement 9 Cash Flow Statement Notes to the financial statements Report of the auditors on the financial 1-2 statements of the OBG Guarantor as at 31 December 2009 Current by-laws (statuto) of the Issuer Documents Information contained Page By-laws (statuto) Entire document All pages Any information not listed above but included in the above documents does not form part of this Prospectus and should be read for information purposes only. The consolidated financial statements of the Issuer as at and for the years ended, respectively, on 31 December 2008 and 31 December 2009 have been audited by KPMG S.p.A., in its capacity as independents auditor of the Issuer, as indicated in their reports thereon. The financial statements referred to above have been prepared in accordance with the International Accounting Standards / International Financial Reporting Standards (IAS/IFRS) issued by the International Accounting Standards Board (IASB) and the relative interpretations of the International Financial Reporting Interpretations Committee (IFRIC), as endorsed and adopted by the European Union under Regulation (EC) 1606/2002. The OBG Guarantor annual financial statements in respect of the year ended on 31 December 2007, prepared in accordance with the International Accounting Standards / International Financial Reporting Standards (IAS/IFRS), have been audited by Dott. Lino De Luca (Public Certified Accountant), in his capacity as independent auditor of the OBG Guarantor, as indicated in his reports thereon. The OBG Guarantor annual financial statements in respect of the years ended, respectively, on 31 December 2008 and 31 December 2009, were prepared in accordance with the International Accounting Standards / International Financial Reporting Standards (IAS/IFRS) and have been audited audited by KPMG S.p.A., in its capacity as independent auditors of the OBG Guarantor, as indicated in their reports thereon. PROSPECTUS SUPPLEMENT If at any time the Issuer shall be required to prepare a prospectus supplement pursuant to Article 13 of the Luxembourg Act dated 10 July 2005 relating to prospectuses for securities, the Issuer will prepare and make available an appropriate amendment or supplement to this Prospectus or a further Prospectus which, in respect of any subsequent issue of OBG to be listed on the Official List and admitted to trading on the Luxembourg Stock Exchange s regulated market, shall constitute a 10

11 prospectus supplement as required by Article 13 of the Luxembourg Act dated 10 July 2005 relating to prospectuses for securities. Each of the Issuer and the OBG Guarantor has given an undertaking to the Dealer(s) that if at any time during the duration of the Programme there is a significant new factor, material mistake or inaccuracy relating to information contained in this Prospectus which is capable of affecting the assessment of any OBG and whose inclusion in or removal from this Prospectus is necessary for the purpose of allowing an investor to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Issuer and the OBG Guarantor, and the rights attaching to the OBG, the Issuer shall prepare an amendment or supplement to this Prospectus or publish a replacement Prospectus for use in connection with any subsequent offering of the OBG and shall supply to each Dealer such number of copies of such supplement hereto as such Dealer may reasonably request. 11

12 STRUCTURE DIAGRAM Representative of the OBGHolders OBGHolders Interest and principal on the OBG Proceeds from the issue of OBG (the Issuer ) OBG Guarantee Asset Monitor Assignment of the Portfolio UniCredit BpC Mortgage S.r.l (the OBG Guarantor ) Purchase price Subordinated Loan Interest and principal on the Subordinated Loan (the Seller and the Servicer ) Portfolio Front Swap cash flows Portfolio Mirror Swap cash flows OBG Front Swap cash flows OBG Mirror Swap cash flows (the Hedging Counterparty of the Portfolio Swap Agreements ) (the Hedging Counterparty of the OBG Swap Agreements ) 12

13 RISK FACTORS Each of the Issuer and the OBG Guarantor believes that the following factors may affect their ability to fulfil their obligations under the OBG issued under the Programme. All of these factors are contingencies which may or may not occur and neither the Issuer nor the OBG Guarantor are in a position to express a view on the likelihood of any such contingency occurring. In addition, factors which the Issuer and the OBG Guarantor believe may be material for the purpose of assessing the market risks associated with OBG issued under the Programme are also described below. Each of the Issuer and the OBG Guarantor believes that the factors described below represent the principal risks inherent in investing in the OBG issued under the Programme, but the inability of the Issuer or the OBG Guarantor to pay interest, principal or other amounts on or in connection with any OBG may occur for other reasons and neither the Issuer nor the OBG Guarantor represents that the statements below regarding the risks of holding any OBG are exhaustive. Prospective investors should also read the detailed information set out elsewhere in this Prospectus (including any document incorporated by reference) and reach their own views prior to making any investment decision. 1. Factors that may affect the Issuer s ability to fulfil its obligations under or in connection with the OBG issued under the Programme Risks concerning liquidity which could affect the Group s ability to meet its financial obligations as they fall due The Group s businesses are subject to risks concerning liquidity which are inherent in its banking operations, and could affect the Group s ability to meet its financial obligations as they fall due or to fulfil commitments to lend. In order to ensure that the Group continues to meet its funding obligations and to maintain or grow its business generally, it relies on customer savings and transmission balances, as well as ongoing access to the wholesale lending markets. The ability of the Group to access wholesale and retail funding sources on favourable economic terms is dependent on a variety of factors, including a number of factors outside of its control, such as liquidity constraints, general market conditions and confidence in the Italian banking system. The global financial system has yet to overcome the difficulties which first manifested themselves in August 2007 and were intensified by the bankruptcy filing of Lehman Brothers in September Financial market conditions have remained challenging and, in certain respects, have deteriorated. In addition, the continued concern about sovereign credit risks in the Euro-zone progressively intensified in the first half of 2010, becoming more acute in early May The sovereign debt ratings of Portugal, Ireland and Spain suffered downgrades between July and December The large sovereign debts and/or fiscal deficits in European countries have raised concerns regarding the financial condition of Euro-zone financial institutions and their exposure to such countries, in particular following the International Monetary Fund and European Union support package for Greece and, more recently, the support package for Ireland. These concerns may have an impact on the ability of Euro-zone banks to access the funding they need, or may increase the costs of such funding, which may cause such banks to suffer liquidity stress. Such 13

14 effects may also extend to banks outside the European Union, in particular to those economies on the periphery of the European Union, including certain Central and Eastern European countries in which the Group operates. If the current concerns over sovereign and bank solvency continue, there is a danger that inter-bank funding may become generally unavailable or available only at elevated interest rates, which might have an impact on the Group s access to, and cost of, funding. Should the Group be unable to continue to source a sustainable funding profile, the Group s ability to fund its financial obligations at a competitive cost, or at all, could be adversely affected. Systemic risk could adversely affect the Group s business In recent years, the global credit environment was adversely affected by significant instances of default and there can be no certainty that further such instances will not occur. Concerns about, or a default by, one institution could lead to significant liquidity problems, losses or defaults by other institutions because the commercial soundness of many financial institutions may be closely related as a result of credit, trading, clearing or other relationships between institutions. This risk is sometimes referred to as systemic risk and may adversely affect financial intermediaries, such as clearing agencies, clearing houses, banks, securities firms and exchanges with which the Group interacts on a daily basis and therefore could adversely affect the Group. Risks associated with general economic, financial and other business conditions The results of the Group are affected by general economic, financial and other business conditions. During recessionary periods, there may be less demand for loan products and a greater number of the Group s customers may default on their loans or other obligations. Interest rate rises may also have an impact on the demand for mortgages and other loan products. Fluctuations in interest rates in Europe and in the other markets in which the Group operates influence its performance. As discussed under Risks concerning liquidity which could affect the Group s ability to meet its financial obligations as they fall due above, these risks are exacerbated by concerns over the levels of the public debt of, and the weakness of the economies in, certain Euro-zone countries. There can be no assurance that the initiatives aimed at stabilising the markets will be sufficient to avert contagion, e.g. the risk that the Greek and Irish sovereign debt crisis will spread to other indebted countries. If there were to be a downgrade in the sovereign debt of the countries in which the Group operates, such downgrade, or the perception that such a downgrade may occur, would be likely to have a material effect in depressing economic activity and restricting the availability, and increasing the cost, of funding for individuals and companies, which might have a material adverse effect on the Group s operating results, financial condition and prospects. Risks connected to an economic slowdown and volatility of the financial markets credit risk The banking and financial services market in which the Group operates is affected by unpredictable factors, including overall economic developments, fiscal and monetary policies, liquidity and expectations within capital markets and consumers behaviour in terms of investment and saving. In particular, the demand for financial products in traditional lending operations could lessen during periods of economic downturn. Overall economic development can furthermore negatively impact the solvency of mortgage debtors and other borrowers of UniCredit and the Group such as to affect their overall financial condition. Such developments could negatively affect the recovery of loans 14

15 and amounts due by counterparties of the Group companies, which, together with an increase in the level of insolvent clients compared to outstanding loans and obligations, will have an impact on the levels of credit risk. The Group is exposed to potential losses linked to such credit risk, in connection with the granting of financing, commitments, credit letters, derivative instruments, currency transactions and other kinds of transactions. This credit risk derives from the potential inability or refusal by customers to honour their contractual obligations under these transactions and the Group s consequent exposure to the risk that receivables from third parties owing money, securities or other assets to it will not be collected when due and must be written off (in whole or in part) due to the deterioration of such third parties respective financial standing (counterparty risk). This risk is present in both the traditional on-balance sheet uncollateralised and collateralised lending business and off-balance sheet business, for example when extending credit by means of a bank guarantee. Credit risks have historically been aggravated during periods of economic downturn or stagnation, which are typically characterised by higher rates of insolvencies and defaults. As part of their respective businesses, entities of the Group operate in countries with a generally higher country risk profile than in their respective home markets (emerging markets). Entities of the Group hold assets located in such countries. The Group s future earnings could also be adversely affected by depressed asset valuations resulting from a deterioration in market conditions in any of the markets in which the Group companies operate. The above factors could also have a significant impact in terms of capital market volatility. As a result, volumes, revenues and net profits in banking and financial services business could vary significantly over time. The Group monitors credit quality and manages the specific risk of each counterparty and the overall risk of the respective loan portfolios, and the Group will continue to do so, but there can be no assurance that such monitoring and risk management will suffice to keep the Group s exposure to credit risk at acceptable levels. Any deterioration of the creditworthiness of significant individual customers or counterparties, or of the performance of loans and other receivables, as well as wrong assessments of creditworthiness or country risks may have a material adverse effect on the Group s business, financial condition and results of operations. In addition, protracted or steep declines in the stock or bond markets in Italy and elsewhere may have an adverse impact on the Group s investment banking, securities trading and brokerage activities, the Group s asset management and private banking services, as well as the Group s investments in and sales of products linked to financial assets performance. Risk connected to the U.S. subprime market crisis The Group s total direct and indirect exposure to U.S. subprime loans as at 30 June 2010 was approximately 39.5 million on a consolidated level (including U.S. Residential Mortgage Backed Securities (RMBSs) and Collateralised Debt Obligations (CDOs)). Certain companies in the Group also sponsor conduits that issued securities to finance the acquisition of mortgage backed loans, which have been included in the Group s consolidated accounts since the 2007 financial year. As at 30 June 2010, the total balance sheet exposure in relation to these conduits amounted to approximately 2,195.6 million. The Group does not sponsor any structured investment vehicles 15

16 ( SIVs ) but invests in notes issued by SIVs, therefore, SIVs are not consolidated in the Group s accounts. Additionally, the following vehicles are consolidated in the Group s accounts: Altus Alpha Plc, Claris Ltd Series 64/2006, Elektra Purchase No. 1 Ltd, Grand Central Funding Corp., Redstone Mortgages Plc, SFCG Scudetto (substantially consolidated) and a further 11 vehicles operating with underlying U.S. municipal and local government bonds. The total balance sheet exposure in relation to these vehicles as at 30 June 2010 was 2,911.8 million. Although management believes that the Group s overall exposure to the U.S. subprime market is not material, UniCredit may suffer losses as a result of the financial turmoil triggered by the subprime markets crisis. In particular, the lack of liquidity in the credit markets that has characterised the subprime crisis has effectively increased UniCredit s funding costs and prevented UniCredit from syndicating some loans that UniCredit would have syndicated in the former environment. UniCredit s management also expects that the results of the Group investment banking operations will suffer from the downturn in market activity experienced since 2007, which may continue. Deteriorating asset valuations resulting from poor market conditions may adversely affect the Group s future earnings The global economic slowdown and economic crisis in certain countries of the Euro-zone have exerted, and may continue to exert, downward pressure on asset prices, which has an impact on the credit quality of the Group s customers and counterparties. This may cause the Group to incur losses or to experience reductions in business activity, increases in non-performing loans, decreased asset values, additional write-downs and impairment charges, resulting in significant changes in the fair values of the Group s exposures. A substantial portion of the Group s loans to corporate and individual borrowers are secured by collateral such as real estate, securities, ships, term deposits and receivables. In particular, as mortgage loans are one of the Group s principal assets, it is highly exposed to developments in real estate markets. Continued decline in the general economy of the countries in which the Group operates, or a general deterioration of economic conditions in any industries in which its borrowers operate or in other markets in which the collateral is located, may result in decreases in the value of collateral securing the loans to levels below the outstanding principal balance on such loans. A decline in the value of collateral securing these loans or the inability to obtain additional collateral may require the Group to reclassify the relevant loans, establish additional provisions for loan losses and increase reserve requirements. In addition, a failure to recover the expected value of collateral in the case of foreclosure may expose the Group to losses which could have a material adverse effect on its business, financial condition and results of operations. Moreover, an increase in financial market volatility or adverse changes in the liquidity of its assets could impair the Group s ability to value certain of its assets and exposures or result in significant changes in the fair values of these assets and exposures, which may be materially different from the current or estimated fair value. Any of these factors could require the Group to recognise write-downs or realise impairment charges, any of which may adversely affect its financial condition and results of operations. 16

17 Risks associated with the Group s exposure to Central and Eastern European countries An important element of the Group s strategy is to expand and develop its business in Central and Eastern Europe. The countries of Central and Eastern Europe have undergone rapid political, economic and social change since the end of the 1980s, and this process was accelerated by the accession to the European Union in May 2004 of many of the Central and Eastern European countries in which companies of the Group operate. A delay in, or the disruption of, the accession process with regard to the Central and Eastern European countries that have not yet joined the European Union (Croatia and Turkey) may have material adverse consequences for the economies of these countries and the Group s business in these countries. UniCredit also expects that competitive pressures in Central and Eastern Europe will increase, as banking groups already active in the banking markets will seek to expand their presence, and new entrants may also move into these markets. The countries of Central and Eastern Europe were adversely affected by the worldwide economic downturn, and the region may face further challenges in coming years due in part to European Union legal, fiscal and monetary policies, which may limit a country s ability to respond to local economic circumstances. A decrease in availability of liquidity exposed the region s dependence on foreign funding, leading to a widening of credit spreads and a credit crunch in certain parts of the region. Further factors, including the lower credit ratings of Central and Eastern European countries and many Central and Eastern European banks, as well as pressure on the region s currencies, contributed to a review of the growth prospects of the region. In particular, Ukraine has experienced a significant currency devaluation and reduction in gross domestic product, causing a deterioration of its banking system. While the Group continues to focus on credit risk management, close monitoring of the liquidity position in CEE countries, generation of deposits to boost liquidity capital injections (including in the Group s Ukrainian subsidiary) and further cost reductions, reaffirming its longterm commitment to the region, there are significant risks associated with doing business in those countries. There are significant differences in the nature of the risks from one country to another, but they generally include comparatively volatile economic, political, foreign exchange and stock market conditions, as well as, in many cases, less developed political, financial and legal infrastructures. Any further deterioration of economic and market conditions in Central and Eastern Europe may also increase the counterparty credit risk associated with this region. There can be no assurance that the Group s financial condition or results of operations will not be materially adversely affected as a result of one or more of these risks. Risks associated with activities of the Group in Kazakhstan The current financial crisis has had a significant impact on the Kazakh economy and, more specifically, on the real estate sector which was affected by rapid decreases in prices. The Kazakh banking system, which is structurally dependant on the real estate sector, suffered a general deterioration, and in 2009 two of the largest banks were nationalised and the four largest banks, with predominantly local shareholdings, accessed state aid. 17

18 In order to address the deterioration of its Kazakh credit portfolio, in 2009 UniCredit carried out a recapitalisation of its subsidiary ATF. Due to the continuation of the economic crisis and the revision of strategic plans, the impairment test on goodwill revealed the need to record a writedown of 162 million. Given the duration of the crisis affecting the Kazakh economy, it is not possible to exclude that a further deterioration of financial conditions of customers might lead the Group to evaluate further initiatives aimed at supporting its subsidiary ATF, with a possible negative impact on the financial condition or results of operations of the Group. Non-traditional banking activities expose the Group to additional credit risks Many of the business activities of the Group that go beyond the traditional banking business of lending and deposit-taking will expose the Group to additional credit risk. Non-traditional credit risk can, for example, arise from: (a) (b) (c) (d) entering into derivatives contracts under which counterparties have obligations to make payments to entities of the Group; executing securities, futures, currency or commodity trades that fail to settle timely due to non delivery by the counterparty or to systems failure by clearing agents, exchanges, clearing houses or other financial intermediaries (including the Group); owning securities of third parties; and extending credit through other arrangements. Parties to these transactions, such as trading counterparties or counterparties issuing securities held by entities of the Group, may default on their obligations to entities of the Group due to insolvency, political and economic events, lack of liquidity, operational failure or other reasons. Defaults with respect to a significant number of transactions or one or more transactions that involve significant volumes would have a material adverse effect on the Group s business, financial condition and results of operations. The Group s risk management policies may fail to provide adequate protection The Group classifies the risk elements in its Italian loan portfolio in accordance with the appropriate requirements of the Bank of Italy and of Italian law, which may not be as strict as the corresponding requirements in certain other countries. The Group has devoted significant resources to developing policies, procedures and assessment methods to manage market, credit, liquidity and operating risk and intends to continue to do so in the future. Nonetheless, the Group s risk management techniques and strategies may not be fully effective in mitigating its risk exposure in all economic market environments or against all types of risks, including risks that the Group fails to identify or anticipate. Any failure in the Group s risk management system and strategies may cause the Group to suffer unexpected losses from unidentified or incorrectly evaluated market developments, trends or other circumstances. These risks and the adverse effects from them may be further aggravated by the complex integration of the risk management systems of the Group with those of acquired entities, as further described under Risks associated with the integration of recent acquisitions below. Furthermore, if existing or potential customers believe that the Group s risk management 18

19 policies and procedures are inadequate, the Group s reputation as well as its revenues and profits may be negatively affected. The Group, like all financial institutions, is exposed to many types of operational risk, including the risk of fraud by employees and outsiders, unauthorised transactions by employees or operational errors (including errors resulting from faulty computer or telecommunications systems) and the risk of losses arising from workplace safety claims, client claims, products distribution claims, fines and penalties due to regulation breaches, damage to the company s physical assets and business disruption. The Group may face increased operational risk as a result of the merger and other changes to UniCredit s organisational structure and business model envisaged as part of the ONE4C ( One for Clients ) project launched on 1 November 2010 as further described under section headed Description of the Issuer The One4C Programme below. The Group s systems and processes are designed to ensure that the operational risks associated with the Group s activities are appropriately monitored. A malfunction or defect in these systems, however, could adversely affect the Group s financial performance and business activities. Fluctuations in interest and exchange rates may affect the Group s results Fluctuations in interest rates in Europe and in the other markets in which the Group operates may influence the Group s performance. The results of the Group s banking operations are affected, inter alia, by the Group s management of interest rate sensitivity. Interest rate sensitivity refers to the relationship between changes in market interest rates and changes in net interest income. A mismatch of interest-earning assets and interest-bearing liabilities in any given period, which tends to accompany changes in interest rates, may have a material effect on the Group s financial condition and results of operations. Lending and deposits activities are strictly dependent on the interest rate risk hedging policies of the Group; in particular the correlation between changes in the interest rates in the reference markets and those in the interest margin. Although UniCredit carries out strategic hedges with the aim of minimising the risk of interest rate fluctuations via entering into derivative contracts, such hedging strategies could be inadequate. As a result, a mismatch between the interest income realised by the Group and the interest expenses due to them, following the movement in interest rates, could significantly affect the financial position and operating results of the Group. Furthermore, a significant portion of the business of the Group is carried out in currencies other than the Euro, predominantly in the legal tender of CEE countries and in US dollars. This exposes the Group to risks connected with fluctuations in exchange rates and with the monetary market. Changes in the Italian and European regulatory framework could adversely affect the Group s business The Group is subject to extensive regulation and supervision by the Bank of Italy, the Italian Securities and Exchange Commission ( CONSOB ), the European Central Bank and the European System of Central Banks. The banking laws to which the Group is subject govern the activities in which banks and foundations may engage and are designed to maintain the safety and soundness of banks, and limit their exposure to risk. In addition, the Group must comply with financial services laws that govern its marketing and selling practices. The regulatory framework governing 19

20 international financial markets is currently being amended in response to the credit crisis, and new legislation and regulations are being introduced in Italy and the European Union that will affect the Group including proposed regulatory initiatives that could significantly alter the Group s capital requirements, such as the following: EU Directive 2009/111/EC ( CRD II ), due to be implemented by 31 December 2010, will change the criteria for assessing hybrid capital eligible to be included in Tier I Capital and may require the Group to replace, over a staged grandfathering period, existing capital instruments that do not fall within these revised eligibility criteria. The CRD II has been transposed into Italian law in December EU 2010/76/EU Capital Requirements Directive III ( CRD III ) (the final text of which has been published in December 2010, with implementation of the relevant rules to occur by 31 December 2011) introduced a number of changes in response to the recent and current market conditions, which will: (i) (ii) (iii) strengthen the capital requirements for trading books to ensure that a bank s assessment of the risks connected with its trading book better reflects the potential losses from adverse market movements in stressed conditions; limit investments in securitisations held in the trading book and re-securitisations by imposing higher capital requirements for re-securitisations to make sure that banks take proper account of the risks of investing in such complex financial products; require banks to disclose more information on their exposure to securitisation risks, such as exposures in the trading book and sponsorship of off-balance sheet vehicles. In February 2010, the European Commission issued a public consultation document on further possible changes to the Capital Requirements Directive IV ( CRD IV ), which is closely aligned with the Basel Committee proposals described below. The CRD IV legislative proposal is expected to be published in early The Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision (the BCBS ), met on 26 July 2010 to review the BCBS s capital and liquidity reform package. The Group of Governors and Heads of Supervision reached broad agreement on the overall design of the capital and liquidity reform package. In particular, this includes the definition of capital, the treatment of counterparty credit risk, the leverage ratio and the global liquidity standard. In September 2010, the BCBS reached an agreement (referred to as Basel III) regarding the global minimum capital standards to be implemented by member countries from January 2013, subject to certain trading arrangements. The agreement will strengthen the global capital framework by, among other things: (i) (ii) raising the quality of the core Tier I capital base in a harmonised manner (including through changes to the items which give rise to adjustments to that capital base); strengthening the risk coverage of the capital framework; 20

21 (iii) (iv) promoting the build up of capital buffers; and introducing a global minimum liquidity standard for the banking sector. In addition, in December 2010, the BCBS issued the Basel III rules text, which presents the details of global regulatory standards on bank capital adequacy and liquidity agreed by the Governors and Heads of Supervision, and endorsed by the G20 Leaders at their November Seoul summit. Significant uncertainty remains around the implementation of some of these initiatives. To the extent certain of these measures are implemented as currently proposed or announced, in particular the changes proposed or announced by the Basel Committee, they would be expected to have a significant impact on the capital and asset and liability management of the Group. Such changes in the regulatory framework and in how such regulations are applied may have a material effect on the Group s business and operations. As the new framework of banking laws and regulations affecting the Group is currently being implemented, the manner in which those laws and related regulations will be applied to the operations of financial institutions is still evolving. No assurance can be given that laws and regulations will be adopted, enforced or interpreted in a manner that will not have an adverse effect on the business, financial condition, cash flows and results of operations of the Group. Risks associated with IT systems The Group s banking activities are dependent on highly sophisticated information technology (IT) systems, which are vulnerable to a number of problems including viruses, hacking and other causes of system failure. These risks and the adverse effects resulting from them may be further aggravated by the complex harmonisation and integration of the Group s IT commercial platforms in Germany and Austria. A failure of the Group to fully implement its strategy may have a material adverse effect on the Group s business, financial condition and results of operations The objective of the Group is to create a new force in European banking with leading positions in its core markets in Italy, Germany, Austria, Poland and Central and Eastern Europe as well as a balanced business portfolio and enhanced growth prospects and it has defined a number of strategic goals in order to achieve this objective. There can be no assurance that the Group will be successful in achieving these strategic goals or that achievement thereof will be sufficient to accomplish the objectives of the Group. A number of factors, some of which are outside the control of the Group (such as market declines and unfavourable macroeconomic conditions in the Group s core markets), the failure to establish clear governance rules within the Group and to align the strategies of the Group s entities with the strategy of the Group as a whole, as well as the failure to integrate the businesses of the Group, could result in an inability to implement some or all of the Group s strategic goals or to fully realise expected synergies, all of which could have a material adverse effect on the Group s business, financial condition and results of operations. Risks associated with the integration of recent acquisitions 21

22 In the past years, UniCredit has concluded or negotiated a number of acquisition agreements, including significant acquisitions in Italy, Germany and Central and Eastern European countries. The integration of these acquisitions has involved and will involve integration challenges, particularly where management information and accounting systems differ materially from those used elsewhere in the Group. Although management believes it has the resources needed to successfully integrate these operations, it is possible that further integration difficulties could arise or that unanticipated problems could be discovered in one or more of the acquired entities. The current structure of the Group has been significantly influenced by the acquisition by UniCredit of HVB in 2005 and of the business combination with the banking group formerly headed by Capitalia S.p.A. (the former Capitalia Group ) in A key part of UniCredit s strategy is to use the synergies from the terms of the aggregation with HVB and the former Capitalia Group to strengthen its competitive position in the markets in which the Group operates. While the integration of the former Capitalia Group has been completed, the integration of HVB is in a phase of advanced implementation. Intense competition, especially in the Italian market, where the Group has a substantial part of its businesses, could have a material adverse effect on the Group s results of operations and financial condition Competition is intense in all of the Group s primary business areas in Italy, Germany, Austria, Poland and Central and Eastern Europe and in the other countries in which the Group conducts its business. The Group derives a substantial part of its total banking income from its banking activities in Italy, a mature market where competitive pressures have been increasing quickly. If the Group is unable to continue to respond to the competitive environment in Italy with attractive product and service offerings that are profitable for the Group, it may lose market share in important areas of its business or incur losses on some or all of its activities. In addition, downturns in the Italian economy could add to the competitive pressure, through, for example, increased price pressure and lower business volumes for which to compete. Ratings UniCredit is rated by Fitch Ratings Limited ( Fitch ), by Moody s Investors Service Limited ( Moody s ) and by Standard & Poor s Ratings Services, a Division of the McGraw Hill Companies Inc. ( Standard & Poor s ). In determining the rating assigned to UniCredit, these rating agencies consider and will continue to review various indicators of the Group s performance, UniCredit s profitability and its ability to maintain its consolidated capital ratios within certain target levels. If UniCredit fails to achieve or maintain any or a combination of more than one of the indicators, including if UniCredit is unable to maintain its consolidated capital ratios within certain target levels, this may result in a downgrade of UniCredit s rating by Fitch, Moody s or Standard & Poor s. Any rating downgrades of UniCredit or other entities of the Group would increase the re-financing costs of the Group and may limit its access to the financial markets and other sources of liquidity, all of which could have a material adverse effect on its business, financial condition and results of operations. 22

23 The ratings assigned to the OBG address the expectation of timely payment of interest and principal on the OBG on or before any payment date falling one year after the Maturity Date. According to Fitch and Standard & Poor s, the ratings assigned to the OBG may address: (i) the likelihood of full and timely payment to OBG Holders of all payments of interest on each Interest Payment Date; and (ii) the likelihood of ultimate payment of principal in relation to OBG on (a) the Maturity Date thereof or (b) if the OBG are subject to an Extended Maturity Date in respect of the OBG in accordance with the applicable Final Terms, the Extended Maturity Date thereof. The ratings that may be assigned by Fitch incorporate both an indication of the probability of default and of the recovery given a default of the relevant OBG. For Moody's, the ratings assigned to the OBG address the expected loss that OBG Holders may suffer. The expected ratings of the OBG are set out in the relevant Final Terms for each Series of OBG. Whether or not a rating in relation to any OBG will be treated as having been issued by a credit rating agency established in the European Union and registered under the CRA Regulation will be disclosed in the relevant Final Terms. Any Rating Agency may lower its rating or withdraw its rating if, in the sole judgment of the Rating Agency, the credit quality of the OBG has declined or is in question. If any rating assigned to the OBG is lowered or withdrawn, the market value of the OBG may reduce. Furthermore, in accordance with the current rating criteria of each of the Rating Agencies, the rating of the OBG may be linked, under certain circumstances, to the then current rating of the Issuer. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating agency. Risks in connection with legal proceedings The Group is subject to certain claims and is a party to legal and other proceedings (including tax proceedings) in the normal course of its business. These risks have been duly analysed by UniCredit and the Group companies involved, including as to whether it is appropriate or necessary to effect provisions (to the extent possible) in an amount believed suitable according to the circumstances or to make a mention thereof in a supplementary note to the balance sheet, in accordance with the appropriate accounting principles. In particular, as at 30 June 2010, the Group had made provisions for approximately 1.4 billion to cover the risk and charges associated with such lawsuits (excluding employment, tax and credit recovery lawsuits) by the Group. In many cases there is substantial uncertainty regarding the outcome of proceedings and the amount of any possible losses. These cases include criminal proceedings, administrative proceedings by regulatory authorities and claims in which the petitioner has not specifically quantified the penalties requested (for example, in putative class actions commenced in the U.S.). In situations where it is impossible to predict the outcome of a dispute and estimate any losses in a reliable manner, no provisions are made. However, where it is possible to provide a reliable estimate of the amount of 23

24 possible losses and the loss is considered likely, provisions are made in the financial statements based on the circumstances and consistent with international accounting standards. A negative outcome for such proceedings could have a negative effect on the financial situation of the Group and of Group companies which are subject to such proceedings. 2. Factors that may affect the OBG Guarantor s ability to fulfil its obligations under or in connection with the OBG issued under the Programme OBG Guarantor only obliged to pay guaranteed amounts when the same are due for Payment The OBG Guarantor has no obligation to pay any Guaranteed Amounts payable under the OBG Guarantee until service by the Representative of the OBG Holders on the Issuer and the OBG Guarantor of a Notice to Pay. A Notice to Pay can only be served by the Representative of the OBG Holders if an Issuer Event of Default has occurred. A Guarantor Acceleration Notice can only be served if a Guarantor Event of Default has occurred. Following service of a Notice to Pay under the terms of the OBG Guarantee (provided that (a) an Issuer Event of Default has occurred and (b) no Guarantor Acceleration Notice has been served), the OBG Guarantor will be obliged to pay any Guaranteed Amounts as and when the same are due for payment. Such payments will be subject to, and will be made in accordance with, the Post-Issuer Event of Default Priority. In these circumstances, other than the Guaranteed Amounts the OBG Guarantor will not be obliged to pay any amount, for example in respect of broken funding indemnities, penalties, premiums, default interest or interest on interest which may accrue on or in respect of the OBG. Extendable obligations under the OBG Guarantee If the Extended Maturity Date is applicable to a Series (or Tranche) and if the OBG Guarantor is obliged under the OBG Guarantee to pay any Guaranteed Amounts and has insufficient funds available under the relevant priority of payments to pay such amount on the Maturity Date, then the obligation of the OBG Guarantor to pay such Guaranteed Amounts shall automatically be deferred to the relevant Extended Maturity Date. However, to the extent the OBG Guarantor has sufficient moneys available to pay in part the Guaranteed Amounts in respect of the relevant Series or Tranche of OBG, the OBG Guarantor shall make such partial payment in accordance with the relevant Priority of Payments, as described in Condition 9 (Redemption and Purchase) on the relevant Maturity Date and any subsequent Payment Date falling prior to the relevant Extended Maturity Date. Payment of the unpaid amount shall be deferred automatically until the applicable Extended Maturity Date. Interest will continue to accrue and be payable on the unpaid Guaranteed Amount on the basis set out in the applicable Final Terms or, if not set out therein, Condition 9 (Redemption and Purchase), mutatis mutandis. In these circumstances, except where the OBG Guarantor has failed to apply money in accordance with the relevant Priority of Payments in accordance with Condition 9 (Redemption and Purchase), failure by the OBG Guarantor to pay the relevant Guaranteed Amount on the Maturity Date or any subsequent OBG Payment Date falling prior to the Extended Maturity Date (or the relevant later date in case of an applicable grace period) shall not constitute a Guarantor Event of Default. However, failure by the OBG Guarantor to pay any 24

25 Guaranteed Amount or the balance thereof, as the case may be, by the relevant Extended Maturity Date and/or pay any other amount due under the OBG Guarantee will (subject to any applicable grace period) constitute a Guarantor Event of Default. No gross-up for taxes Notwithstanding anything to the contrary in this Prospectus, if withholding of, or deduction of any present or future taxes, duties, assessments or charges of whatever nature is imposed by or on behalf of Italy, any authority therein or thereof having power to tax, the OBG Guarantor will make the required withholding or deduction of such taxes, duties, assessments or charges for the account of the OBG Holders, as the case may be, and shall not be obliged to pay any additional amounts to the OBG Holders. Limited resources available to the OBG Guarantor The obligation of the OBG Guarantor to fulfil its obligation under the OBG Guarantee will be limited recourse to the Available Funds The OBG Guarantor s ability to meet its obligations under the OBG Guarantee will depend on the realisable value of the Portfolio and of the Eligible Investments (if any), the amount of principal and revenue proceeds generated by the Portfolio and Eligible Investments (if any) and the timing thereof and amounts received from the Hedging Counterparties (if any) and the Account Bank or in accordance with the Transaction Documents. The OBG Guarantor will not have any other source of funds available to meet its obligations under the OBG Guarantee. The proceeds of the Portfolio, the Eligible Investments (if any), any amount received from the Hedging Counterparties (if any), the Account Bank or in accordance with the Transaction Documents may not be sufficient to meet the claims of all the Secured Creditors, including the OBG Holders. If the Secured Creditors have not received the full amount due to them pursuant to the terms of the Transaction Documents, then they may still have an unsecured claim against the Issuer for the shortfall. There is no guarantee that the Issuer will have sufficient funds to pay that shortfall. OBG Holders should note that the Amortisation Test - which applies further to the occurrence of an Issuer Event of Default - has been structured to ensure that the outstanding nominal amount of the Eligible Portfolio, together with any Eligible Investments (if any), any amount received from the Hedging Counterparties (if any), the Account Bank or in accordance with the Transaction Documents, shall be higher than or equal to the nominal amount of the outstanding OBG, which should reduce the risk of there ever being a shortfall. In addition the MEF Decree and the BoI OBG Regulations provide for certain mandatory tests aimed at ensuring, inter alia, that (a) the net present value of the Portfolio (net of certain costs) shall be higher than or equal to the net present value of the OBG; and (b) the amount of interests and other revenues generated by the Portfolio (net of certain costs) shall be higher than the interests and costs due by the Issuer under the OBG (see Credit Structure below for more details on the Mandatory Tests, the Over-Collateralisation Test and the Amortisation Test). However there is no assurance that there will not be any shortfall. Reliance of the OBG Guarantor on third parties 25

26 The OBG Guarantor has entered into agreements with a number of third parties, which have agreed to perform services for the OBG Guarantor. In particular, but without limitation, the Servicer has been appointed to service the Portfolio and the Asset Monitor has been appointed to monitor compliance with the Over-Collateralisation Test, the Amortisation Test and the Mandatory Tests. In the event that any of those parties fails to perform its obligations under the relevant agreement to which it is a party, the realisable value of the Portfolio or any part thereof may be affected, or, pending such realisation (if the Portfolio or any part thereof cannot be sold), the ability of the OBG Guarantor to make payments under the OBG Guarantee may be affected. For instance, if the Servicer has failed to adequately administer the Portfolio, this may lead to higher incidences of nonpayment. The ability of the OBG Guarantor to make payments in respect of the OBG, where applicable, will depend upon the due performance by the parties to the Transaction Documents of their respective various obligations under the Transaction Documents to which they are each a party. In particular, without limitation, the punctual payment of amounts due on the OBG will depend on the ability of the Servicer to service the Portfolio, the Hedging Counterparties complying with their obligation under the relevant Swap Agreement and the continued availability of hedging under the relevant Swaps Agreement. The performance of such parties of their respective obligations under the relevant Transaction Documents is dependent on the solvency of each relevant party. In each case, the performance by the OBG Guarantor of its obligations under the Transaction Documents is also dependent on the solvency of, inter alios, the Servicer and the Hedging Counterparties. If a Servicer Termination Event (as defined in the Servicing Agreement) occurs the OBG Guarantor, upon indication by the Issuer and subject to the approval in writing of the Representative of the OBG Holders, shall appoint another entity which shall be an eligible entity as successor servicer (the Successor Servicer ) which shall perform the servicing activities required to be performed by the Servicer, in accordance with the terms of the Intercreditor Agreement and of the Servicing Agreement. Upon the occurrence of a Servicer Termination Event, the obligors under the Portfolio will be instructed to pay all the amounts due in respect of the Portfolio directly on a bank account opened with an Eligible Institution in the name of the OBG Guarantor. The Representative of the OBG Holders is not obliged in any circumstances to act as a servicer or to monitor the performance by any servicer of its obligations. Reliance on Hedging Counterparties To provide a hedge against any interest rate risk on the Portfolio, the OBG Guarantor entered into the Portfolio Front Swap Agreements with the relevant Hedging Counterparty. In addition, to provide a hedge against interest rate risks and currency risk (if any) in respect of each Series or Tranche of the OBG issued under the Programme, the Issuer entered into the OBG Front Swap Agreements with the relevant Hedging Counterparty. In addition to the above, on the same date of execution of the Portfolio Front Swap Agreements, the OBG Guarantor will enter, from time to time, in a relevant mirror swap agreements (the Portfolio Mirror Swap Agreements ) and, on the same date of execution of each OBG Front Swap Agreements the OBG Guarantor will enter, from time to time, in a relevant mirror swap agreement (the OBG Mirror Swap Agreements ). The 26

27 Portfolio Mirror Swap Agreements and the OBG Mirror Swap Agreements will be terminated at zero cost for the OBG Guarantor upon occurrence of an Issuer Event of Default. If the OBG Guarantor fails to make timely payments of amounts due under any Swap Agreement, then it will (unless otherwise stated in the relevant Swap Agreement) have defaulted under that Swap Agreement. A Hedging Counterparty is (unless otherwise stated in the relevant Swap Agreement) only obliged to make payments to the OBG Guarantor as long as the OBG Guarantor complies with its payment obligations under the relevant Swap Agreement. If the Hedging Counterparty is not obliged to make payments or if it defaults in its obligations to make payments of amounts in the relevant currency equal to the full amount to be paid to the OBG Guarantor on the payment date under the Swap Agreements, the OBG Guarantor will be exposed to changes in the relevant currency exchange rates to Euro and to any changes in the relevant rates of interest. In addition, subject to a confirmation from the Rating Agencies (where applicable) that the then current ratings of the OBG would not be adversely affected, the OBG Guarantor may hedge only part of the possible risk and, in such circumstances, may have insufficient funds to make payments under the OBG Guarantee. If a Swap Agreement terminates, then the OBG Guarantor may be obliged to make a termination payment to the relevant Hedging Counterparty according to the relevant Priority of Payments. There can be no assurance that the OBG Guarantor will have sufficient funds available to make a termination payment under the relevant Swap Agreement, nor can there be any assurance that the OBG Guarantor will be able to enter into a replacement swap agreement, or if one is entered into, that the credit rating of the replacement hedging counterparty will be sufficiently high to prevent a downgrade of the then current ratings of the OBG by the Rating Agencies. In addition, the Swap Agreements may provide that notwithstanding the relevant Hedging Counterparty ceasing to be assigned the requisite ratings and the failure by the Hedging Counterparty to take any of the remedial actions set out in the relevant Swap Agreement, the OBG Guarantor may terminate the swap until a replacement hedging counterparty has been found. However, there can be no assurance that the OBG Guarantor will be able to enter into a replacement swap agreement with a replacement hedging counterparty with the required ratings. If the OBG Guarantor is obliged to pay a termination payment under any Swap Agreement, any payment due under the relevant Swap Agreement, including any termination payment arising out of a termination event, other than termination payments where the relevant Hedging Counterparties is the defaulting party or the sole affected party, but including, in any event, the amount of any termination payment due and payable to the relevant Hedging Counterparty in relation to the termination of the swap transactions to the extent of any premium received (net of any costs reasonably incurred by the OBG Guarantor to find a replacement swap counterparty), if any, by the OBG Guarantor from a replacement swap counterparty in consideration for entering into swap transactions with the OBG Guarantor on the same terms as the relevant Swap Agreement will rank ahead of amounts due on the OBG (the Hedging Senior Payments ). With respect to the Additional Provisions Mark to Market payment in the Portfolio Front Swap, also any termination payment under this clause will be part of the Hedging Senior Payments for an amount up to the difference (if positive) on each Guarantor Payment Date between the purchase 27

28 price paid by any purchaser/s of the Selected Asset and the Principal Amount Outstanding of the Asset and Integrative Asset sold to such purchaser/s. Limited description of the Portfolio OBG Holders will not receive detailed statistics or information in relation to the Assets in the Portfolio, because it is expected that the constitution of the Portfolio will frequently change due to, for instance: (i) UniCredit (as Seller and Issuer) or the Additional Seller (if any) selling further Assets (or Assets, which are of a type that have not previously been comprised in the Portfolio to the OBG Guarantor); (ii) UniCredit (as Seller and Issuer) or the Additional Seller (if any) repurchasing certain Assets in accordance with the Master Transfer Agreement; and (iii) UniCredit (as Seller and Servicer) or the Additional Seller (if any) being granted by the OBG Guarantor with a wide power to renegotiate the terms and conditions of the Assets or further Assets. However, each Mortgage Receivables or further Mortgage Receivables will be required to meet the Criteria and to conform with the representations and warranties set out in the Warranty and Indemnity Agreement see Description of the Transaction Documents Warranty and Indemnity Agreement below. In addition, the Mandatory Tests and the Over-Collateralisation Test are intended to ensure that the Outstanding Principal Balance of the Eligible Portfolio is higher than or equal to the Outstanding Principal Balance of the OBG for so long as OBG remain outstanding and the Calculation Agent will provide on each relevant Calculation Date or OC Calculation Agent a basis reports that will set out certain information in relation to the Mandatory Tests and the Over- Collateralisation Test. In addition to the above, according to the Master Transfer Agreement, the Warranty and Indemnity Agreement and the Servicing Agreement, (i) UniCredit (as Seller and Issuer) (or the Additional Seller (if any) as the case may be) and the OBG Guarantor may, without the prior consent of the Representative of the OBG Holders or the OBG Holders approval, amend the General Criteria and the Specific Criteria (ii) UniCredit (as Seller and Issuer) (or the Additional Sellers (if any) as the case may be) and the OBG Guarantor may, without the prior consent of the Representative of the OBG Holders or the OBG Holders, amend certain representations and warranties granted in relation to newly assigned Mortgage Receivables if such amendment are necessary as a consequence of a change in the lending policies of the Seller (or the Additional Seller (if any) as the case may be), (iii) the Seller and the OBG Guarantor may, without the prior consent of the Representative of the OBG Holders or the OBG Holders approval, amend the Specific Criteria and the representation and warranties in relation to the sale of further assets originated by entities belonging to the UniCredit Banking Group other than the Seller (and included within the Capitalia Group banks) and (iv) the Seller and the OBG Guarantor may, without the prior consent of the Representative of the OBG Holders or the OBG Holders approval, amend the Master Transfer Agreement and the other relevant Transaction Documents in case of a change in law or new interpretations, amendments or further guidelines issued by the Bank of Italy or any competent regulator, provided that any such above 28

29 amendment will be subject to notification to the Rating Agencies and the Representative of the OBG Holders and, if provided for under the relevant agreement, confirmation by the same Rating Agencies that the relevant amendment does not impact the rating assigned to the OBG. In accordance with the Portfolio Administration Agreement, any Additional Seller may sell to the OBG Guarantor, and the latter shall purchase, Assets and Integration Assets without the prior consent of the Representative of the OBG Holders or the OBG Holders and, inter alia, subject to (i) the written approval by UniCredit as Issuer and Seller in relation to such sale, (ii) with respect to the purchase of Assets and Integration Assets, confirmation by the Rating Agencies that the assignment by the Additional Sellers would not adversely affect the then current ratings of the existing OBG, (iii) the execution of a master transfer agreement by the Additional Seller, substantially in the form of the Master Transfer Agreement (as amended to take into account the characteristics of the Assets or the Integration Assets sold by it) or in such other form as may be agreed amongst the Additional Seller and the OBG Guarantor and (iv) the granting of a subordinated loan by the Additional Seller for the purpose of financing the purchase of Assets or Integration Assets from it in accordance with the provision of a subordinated loan agreement to be executed substantially in the form of the Subordinated Loan Agreement. Sale of Selected Assets following the occurrence of an Issuer Event of Default If a Notice to Pay is served on the OBG Guarantor, then the OBG Guarantor shall (if necessary in order to effect timely payments under the OBG, as determined by the Calculation Agent in consultation with the Portfolio Manager) sell Selected Assets (selected on a Random Basis) in order to make payments to the OBG Guarantor s creditors including making payments under the OBG Guarantee, see Description of the Transaction Documents Portfolio Administration Agreement below. There is no guarantee that a buyer will be found to acquire Selected Assets at the times required and there can be no guarantee or assurance as to the price which may be able to be obtained for such Selected Assets, which may affect payments under the OBG Guarantee. However, the Selected Assets may not be sold by the OBG Guarantor for less than an amount equal to the Required Redemption Amount for the relevant Series or Tranche of OBG until six months prior to the Maturity Date in respect of such OBG or (if the same is specified as applicable in the relevant Final Terms) the Extended Maturity Date in respect of such OBG. In the six months prior to, as applicable, the Maturity Date or Extended Maturity Date, the OBG Guarantor is obliged to sell the Selected Assets for the best price reasonably available notwithstanding that such price may be less than the Required Redemption Amount. Realisation of assets following the occurrence of a Guarantor Event of Default If a Guarantor Event of Default occurs and a Guarantor Acceleration Notice is served on the OBG Guarantor, then the OBG Guarantor is obliged to sell the Selected Assets as quickly as reasonably practicable taking into account the market conditions at that time (see Description of the Transaction Documents Portfolio Administration Agreement below). There is no guarantee that the proceeds of realisation of the Portfolio will be in an amount sufficient to repay all amounts due to creditors (including the OBG Holders) under the OBG and the 29

30 Transaction Documents. If a Guarantor Acceleration Notice is served on the OBG Guarantor then the OBG may be repaid sooner or later than expected or not at all. Factors that may affect the realisable value of the Portfolio or the ability of the OBG Guarantor to make payments under the OBG Guarantee Following the occurrence of an Issuer Event of Default, the service of a Notice to Pay on the Issuer and on the OBG Guarantor, the realisable value of Selected Assets comprised in the Portfolio may be reduced (which may affect the ability of the OBG Guarantor to make payments under the OBG Guarantee) by: (i) default by borrowers of amounts due on their claims; (ii) changes to the lending criteria of UniCredit (or the Additional Seller (if any) as the case may be); (iii) set-off risks in relation to some types of Mortgage Receivables in the Portfolio; (iv) limited recourse to the OBG Guarantor; (v) possible regulatory changes by the Bank of Italy, Consob and other regulatory authorities; (vi) regulations in Italy that could lead to some terms of the Mortgage Receivables being unenforceable; (vii) timing for the relevant sale of Assets; and (viii) status of the real estate market in the areas where the Issuer operates. Each of these factors is considered in more detail below. However, it should be noted that the Mandatory Tests, the Over-Collateralisation Test and the Amortisation Test are intended to ensure that there will be an adequate amount of Mortgage Receivables in the Portfolio and moneys standing to the credit of the Accounts (including any amount invested in Eligible Investments (if any) and without duplication to the above) to enable the OBG Guarantor to repay the OBG following an Issuer Event of Default, service of a Notice to Pay on the Issuer and on the OBG Guarantor and accordingly it is expected (although there is no assurance) that Selected Assets could be realised for sufficient values to enable the OBG Guarantor to meet its obligations under the OBG Guarantee. Priority of Payments The validity of contractual priority of payments such as those contemplated in this transaction has been challenged recently in the English and U.S. courts. The hearings have arisen due to the insolvency of a secured creditor (in that case a swap counterparty) and have considered whether such payment priorities breach the "anti-deprivation" principle under English and U.S insolvency law. This principle prevents a party from agreeing to a provision that deprives its creditors of an asset upon its insolvency. It was argued that where a secured creditor subordinates itself to bondholders in the event of its insolvency, that secured creditor effectively deprives its own creditors. The Court of Appeal in Perpetual Trustee Co Ltd v BNY Corporate Trustee Services Ltd ([2009] EWCA Civ 1160) (the Perpetual Case ) dismissed this argument and upheld the validity of similar priority of payments, stating that the anti-deprivation principle was not breached by such 30

31 provisions. However, Judge Peck of the U.S. Bankruptcy Court for the Southern District of New York has, in the case of Lehman Brothers Special Financing Inc. V BNY Corporate Trustee Services Limited Case No (Bankr. S.D.N.Y.)(JMP) (the Lehman Brothers Case ) granted Lehman Brothers Special Finance Inc.'s motion for summary judgement to the effect that such provisions do infringe the anti-deprivation principle in a U.S. insolvency. Judge Peck acknowledged that this has resulted in the U.S. courts coming to a decision directly at odds with the judgement of the English Courts. The implications of this conflicting judgment are not yet known and the insolvent party in the Perpetual Case has been granted leave to appeal the decision to the Supreme Court, whilst BNY Corporate Trustee Services Limited has filed its motion for leave to appeal the Lehman Brothers Case decision with the U.S. Bankruptcy Court. The question of the validity of the payment priorities will therefore be considered again and, given the current state of U.S. and English law, this is likely to be an area of continued judicial focus particularly in respect of multijurisdictional insolvencies. Value of the Portfolio The OBG Guarantee granted by the OBG Guarantor in respect of the OBG will be backed by the Portfolio and the recourse against the Guarantor will be limited to such assets. Since the economic value of the Portfolio may increase or decrease, the value of the OBG Guarantor s assets may decrease (for example if there is a general decline in property values). The Issuer makes no representation, warranty or guarantee that the value of a Real Estate will remain at the same level as it was on the date of the origination of the related Mortgage Receivable or at any other time. If the residential property market in Italy experiences an overall decline in property values, the value of the Mortgage Receivable could be significantly reduced and, ultimately, may result in losses to the holders of the OBG if such security is required to be enforced. No representations or warranties to be given by the OBG Guarantor if Selected Assets and their related security interests are to be sold After the service of a Notice to Pay on the Issuer and the OBG Guarantor, but prior to service of a Guarantor Acceleration Notice, the OBG Guarantor shall, if necessary in order to effect timely payments under the OBG, sell the Selected Assets and their related security interests included in the Portfolio, subject to a right of pre-emption of the Seller and of any Additional Seller (if any) pursuant to the terms of the Master Transfer Agreement and of the Portfolio Administration Agreement. In respect of any sale of Selected Assets and their related security interests to third parties, however, the OBG Guarantor will not provide any warranties or indemnities in respect of such Selected Assets and related security interests and there is no assurance that the Seller and any Additional Seller (if any) would give or repeat any warranties or representations in respect of the Selected Assets and related security interests or if it has not consented to the transfer of such warranties or representations. Any representations or warranties previously given by the Seller in respect of the Mortgage Receivables in the Portfolio may not have value for a third party purchaser if the Seller or the relevant Additional Seller (if any) is then insolvent. Accordingly, there is a risk that the realisable value of the Selected Assets and related security interests could be adversely affected by the lack of representations and warranties which in turn could adversely affect the ability of the OBG Guarantor to meet its obligations under the OBG Guarantee. 31

32 Default by borrowers in paying amounts due on their Assets Borrowers may default on their obligations due under the Assets for a variety of reasons. The Mortgage Receivables are affected by credit, liquidity and interest rate risks. Various factors influence delinquency rates, prepayment rates, repossession frequency and the ultimate payment of interest and principal, such as changes in the national or international economic climate, regional economic conditions, changes in tax laws, interest rates, inflation, the availability of financing, yields on alternative investments, political developments and government policies. Certain factors may lead to an increase in default by the borrowers, and could ultimately have an adverse impact on the ability of borrowers to repay the Mortgage Receivables. Loss of earnings, illness,divorce and other similar factors may lead to an increase in default by and bankruptcies of borrowers, and could ultimately have an adverse impact on the ability of borrowers to repay the Mortgage Receivables. In addition, the ability of a borrower to sell a property given as security for a Mortgage Receivable at a price sufficient to repay the amounts outstanding under that Mortgage Receivable will depend upon a number of factors, including the availability of buyers for that property, the value of that property and property values in general at the time. The recovery of amounts due in relation to a Mortgage Receivable classified as a Defaulted Receivables will be subject to the effectiveness of enforcement proceedings in respect of the Portfolio which in Italy can take a considerable time depending on the type of action required and where such action is taken and on several other factors, including the following: proceedings in certain courts involved in the enforcement of the Mortgage Receivables and Mortgages may take longer than the national average; obtaining title deeds from land registries which are in process of computerising their records can take up to two or three years; further time is required if it is necessary to obtain an injunction decree (decreto ingiuntivo) and if the relevant Debtor raises a defence to or counterclaim in the proceedings; and it takes an average of six to eight years from the time lawyers commence enforcement proceedings until the time an auction date is set for the forced sale of any Real Estate. Law number 302 of 3 August 1998 permits notaries, accountants and lawyers to conduct certain stages of the enforcement procedures in place of the courts in order to reduce the length of enforcement proceedings by between two and three years. Changes to the lending criteria of the Seller Each of the Mortgage Receivables originated by the Seller will have been originated in accordance with its lending criteria at the time of origination. Each of the Mortgage Receivables sold to the OBG Guarantor by the Seller, but originated by a person other than the Seller (an Originator ), will have been originated in accordance with the lending criteria of such Originator at the time of origination. It is expected that the Seller s or the relevant Originator s, as the case may be, lending criteria will generally consider term of loan, indemnity guarantee policies, status of applicants and credit history. In the event of the sale or transfer of any Mortgage Receivables to the OBG Guarantor, the Seller will warrant that (a) such Mortgage Receivables as were originated by it were originated in accordance with the Seller s lending criteria applicable at the time of origination and (b) such Mortgage Receivables as were originated by an Originator, were originated in accordance with the relevant Originator s lending criteria applicable at the time of origination. The Seller retains the right to revise its lending criteria from time to time subject to the terms of the Master Transfer Agreement. An Originator may additionally revise its lending criteria at any time. 32

33 However, if such lending criteria change in a manner that affects the creditworthiness of the Mortgage Receivables, that may lead to increased defaults by borrowers and may affect the realisable value of the Portfolio and the ability of the OBG Guarantor to make payments under the OBG Guarantee. Legal risks relating to the Assets The ability of the OBG Guarantor to recover payments of interest and principal from the Assets is subject to a number of legal risks. These include the risks set out below. Set-off risks The assignment of receivables under Law 130 is governed by article 58, paragraph 2, 3 and 4, of the Banking Law. According to the prevailing interpretation of such provision, such assignment becomes enforceable against the relevant debtors as of the later of (i) the date of the publication of the notice of assignment in the Official Gazette of the Republic of Italy (Gazzetta Ufficiale della Repubblica Italiana), and (ii) the date of registration of the notice of assignment in the competent companies register. Consequently, the rights of the OBG Guarantor may be subject to the direct rights of the borrowers against the Seller or, as applicable the relevant Originator, including rights of set-off on claims arising existing prior to notification in the Official Gazette and registration at the competent companies register. Some of the Assets in the Portfolio may have increased risks of set-off, because the Seller or, as applicable, the relevant Originator is required to make payments under them to the borrowers. In addition, the exercise of set-off rights by borrowers may adversely affect any sale proceeds of the Portfolio and, ultimately, the ability of the OBG Guarantor to make payments under the OBG Guarantee. Usury Law Italian Law number 108 of 7 March 1996 (the ( Usury Law ) introduced legislation preventing lenders from applying interest rates equal to or higher than rates (the ( Usury Rates ) set every three months on the basis of a decree issued by the Italian Treasury (the last such Decree having been issued on 23 September 2010). In addition, even where the applicable Usury Rates are not exceeded, interest and other advantages and/or remuneration may be held to be usurious if: (i) they are disproportionate to the amount lent (taking into account the specific circumstances of the transaction and the average rate usually applied for similar transactions) and (ii) the person who paid or agreed to pay was in financial and economic difficulties. The provision of usurious interest, advantages or remuneration has the same consequences as non-compliance with the Usury Rates. In certain judgements issued during 2000, the Italian Supreme Court (Corte di Cassazione) ruled that the Usury Law applied both to loans advanced prior to and after the entry into force of the Usury Law. Although the Italian Government subsequently intervened by enacting a decree aimed at softening the effect of the Usury Law, the amount payable by borrowers pursuant to the Mortgage Receivables may be subject to reduction, renegotiation or repayment. Compounding of interest (anatocismo) Pursuant to article 1283 of the Italian civil code, accrued interest in respect of a monetary claim or receivable may be capitalised after a period of not less than six months only (i) under an agreement subsequent to such accrual or (ii) from the date when any legal proceedings are commenced in 33

34 respect of that monetary claim or receivable. Article 1283 of the Italian civil code allows derogation from this provision in the event that there are recognised customary practices (usi) to the contrary. Banks and financial companies in the Republic of Italy have traditionally capitalised accrued interest on a three-monthly basis on the grounds that such practice could be characterised as a customary practice (uso normativo). However, a number of recent judgments from Italian courts (including judgments from the Italian Supreme Court (Corte di Cassazione) No. 2374/99, No. 2593/2003, No /2004, No. 4094/2005 and No /2005) have held that such practices are not uso normativo. Consequently, if customers of the Originator were to challenge this practice and such interpretation of the Italian civil code were to be upheld before other courts in the Republic of Italy, there could be a negative effect on the returns generated from the Mortgage Loans. UCI has, however, represented in the Warranty and Indemnity Agreement that the Mortgage Loans comply with article 1283 of the Italian civil code In this respect, it should be noted that article 25, paragraph 3, of legislative decree No. 342 of 4 August 1999 ( Law No. 342 ), enacted by the Italian Government under a delegation granted pursuant to law No. 142 of 19 February 1992, has considered the capitalisation of accrued interest (anatocismo) made by banks prior to the date on which it came into force (19 October 1999) to be valid. After such date, the capitalisation of accrued interest is no longer possible upon the terms established by a resolution of the CICR issued on 22 February Law No. 342 has been challenged and decision No. 425 of 17 October 2000 of the Italian Constitutional Court has declared as unconstitutional under the provisions of Law No. 342 regarding the validity of the capitalisation of accrued interest made by banks prior to the date on which Law No. 342 came into force. Mortgage borrower protection Prepayment fees On 31 January 2007 the Italian Government adopted law decree No. 7 which was later converted into law by Law No. 40 of 2 April 2007 (the Bersani Decree ). The Bersani Decree aims at, inter alia, increasing competitiveness in a number of sectors, including the banking sector with particular regard to residential mortgage loans. The costs associated with prepayment of mortgage loans in Italy (including the prepayment fees requested by Italian banks and the notarial fees and tax costs associated with the refinancing) have caused prepayment rates in the Italian market to be lower compared to other jurisdictions. The Bersani Decree aims at reducing these costs with a view to allow borrowers to refinance their mortgage loans more easily. With specific regard to mortgage loans (and, in particular, mortgage loans granted to individuals for the purchase or the restructuring of residential properties) executed after 2 February 2007, under article 7 of the Bersani Decree prepayment fees are no longer permitted. Any provision to the contrary is null and void. The Bersani Decree contains also provisions applicable to mortgage loans for the purchase of residential properties executed before 2 February 2007 (such as the Mortgage Receivables in the Portfolio). In this respect, the Bersani Decree lays down basic rules which may lead to a 34

35 renegotiation of the relevant mortgage loans and, more importantly, a reduction of the applicable prepayment fees. Pursuant to article 7 of the Bersani Decree, on 2 May 2007 the Italian banking association (ABI Associazione Bancaria Italiana) and the national consumers associations as identified in accordance with article 137 of the legislative decree No. 206 of 6 September 2006 (i.e. the Italian consumers protection code) agreed the general guidelines for a renegotiation of the existing mortgage loans (the Prepayment Agreement ). The terms of the Prepayment Agreement reproduced below have been extracted by a press release issued by the Italian banking association (ABI Associazione Bancaria Italiana) on 2 May 2007 and has been accurately reproduced and, as far as the Issuer is aware and able to ascertain from information published by the Italian banking association (ABI Associazione Bancaria Italiana), no facts have been omitted which would render this information inaccurate or misleading. In particular, the Prepayment Agreement provides for the following maximum thresholds for prepayment fees: (a) in respect of floating rate mortgage loans: (i) 0.50 per cent.; (ii) 0.20 per cent. if the prepayment occurs in the third year before the maturity of the mortgage loan; and (iii) nil if the prepayment occurs in the last two years before the maturity of the mortgage loan; (b) in respect of fixed rate mortgage loans granted before 1 January 2001: (i) 0.50 per cent.; (ii) 0.20 per cent. if the prepayment occurs in the third year before the maturity of the mortgage loan; and (iii) nil if the prepayment occurs in the last two years before the maturity of the mortgage loan; (c) in respect of fixed rate mortgage loans granted after 31 December 2000: (i) 1.90 per cent. if the prepayment occurs during the first half of the tenor of the mortgage loan; (ii) 1.50 per cent. if the prepayment occurs during the second half of the tenor of the mortgage loan; (iii) 0.20 per cent if the prepayment occurs in the third year before the maturity of the mortgage loan; and (iv) nil if the prepayment occurs in the last two years before the maturity of the mortgage loan. In respect of mixed rate mortgage loans (i.e. those mortgage loans whose interest rate may vary from a fixed rate to a floating one and viceversa), the Prepayment Agreement provides for the applicability of one of the reductions described under (a), (b) and (c) above depending, inter alia, 35

36 on the date of granting of the mortgage loans, the remaining term of, and type of interest rate applied to, the relevant mortgage loan as at the date when the prepayment occurs. The Prepayment Agreement further provides that if the contractually agreed prepayment fee is equal to or lower than the thresholds described above, the applicable prepayment fee will be subject to the following additional reductions: (a) in respect of floating rate mortgage loans and fixed rate mortgage loans granted before 1 January 2001, 0.20 per cent.; and (b) in respect of fixed rate mortgage loans granted after 31 December 2000, if (i) the contractually agreed prepayment fee is equal to or higher than 1.25 per cent., 0.25 per cent.; and (ii) the contractually agreed prepayment fee is lower than 1.25 per cent., 0.15 per cent. In any case, banks (as well as their assignees, including the OBG Guarantor) may not refuse the renegotiation of an existing mortgage loan (including the Mortgage Receivables in the Portfolio) if the relevant debtor proposes to reduce the prepayment fee within the limits set out in the Prepayment Agreement. In relation to the provisions of the Prepayment Agreement, it is expected that further interpretative and supplemental indications may be issued, the specific impact of which cannot be accurately anticipated at this time. The Bersani Decree moreover includes other miscellaneous provisions relating to mortgage loans which include, inter alia, simplified procedures meant to allow a more prompt cancellation of mortgages securing loans granted by banks or financial intermediaries in the event of a documented repayment in full by the debtors of the amounts due under the loans. While such provisions do not impact on the monetary rights of the lenders under the loans (lenders retain the right to oppose the cancellation of a mortgage), the impact on the servicing procedures in relation to the applicable loan agreements cannot be entirely assessed at this time. Prospective OBG Holders attention is drawn to the fact that the entry into force of the Bersani Decree is expected to have an impact on the market of residential mortgage loans with particular regard to the enforceability of the borrowers obligations to pay prepayment fees to the lender (and their assignees, including the OBG Guarantor) and the rate of prepayments. As a result of the entry into force of the Bersani Decree, the OBG Guarantor may not be able to recover the prepayment fees in the amount originally agreed with the borrowers. Furthermore, the rate of prepayment in respect of the Mortgage Receivables can be sensibly different than the one traditionally experienced by the Seller for residential mortgage loans. Subrogation under the Bersani Decree Under article 8 of the Bersani Decree, a borrower under a mortgage loan may unilaterally subrogate (i.e. replace) the original lending bank (or its assignees, including the OBG Guarantor) with a new lender in accordance with article 1202 of the Italian civil code even if the original mortgage loan agreement provides that the relevant debtor may not repay the loan before a pre-determined term. In case of subrogation, the mortgage and collateral securities that guarantee the mortgage loan will pass to the new lender without any substantial formality. 36

37 In addition, Italian law number 244 of 24 December 2007 (the 2008 Budget Law ) provides for certain measures for the protection of consumers rights and the promotion of the competition in, inter alia, the Italian mortgage loan market. The new provisions of law facilitate the exercise by the borrowers of their right to prepayment of the loan and/or subrogation of a new bank into the rights of their creditors in accordance with article 1202 (surrogazione per volontà del debitore) of the Italian civil code, by eliminating the limits and costs previously borne by the borrowers for the exercise of such right. The recent Italian law decree No. 78 of 1 July 2009 (as converted into law by the Italian law No. 102 of 3 August 2009) provides, inter alia, that if the subrogation has not been executed within 30 days from the date of assignee bank s request of interbank cooperation procedures, the original bank shall indemnify the relevant borrower for an amount equal to 1 per cent. of the mortgage value for each month or portion of month of delay. In the event the delay is due to circumstances ascribed to the assignee bank, the original bank shall be entitled to recover the indemnity paid to the borrower from the assignee bank. Borrower s right to suspend payments under a Mortgage Loan Pursuant to article 2, paragraph 475 and ff. of the 2008 Budget Law any borrower under a mortgage loan agreement executed for the purposes of acquiring a first home real estate property (unità immobiliare da adibire ad abitazione principale) giving evidence of its incapability to pay any instalments falling due under a mortgage loan is entitled to suspend payment of any such instalments for no more than two times during the life of the relevant mortgage loan and for a maximum duration of 18 months (the Borrower Payment Suspension Right ). Upon exercise of the Borrower Payment Suspension Right the duration of the relevant mortgage loan will be extended of a period equal to the duration of the relevant suspension period. The 2008 Budget Law also provided for the establishment of a fund (so called Fondo di solidarietà, the Fund ) created for the purpose of bearing certain costs deriving from the suspension of payments and refers to implementing regulation to be issued for the determination of: (i) the requirements that the borrowers must comply with in order to have the right to the aforementioned suspension and the subsequent aid of the Fund; and (ii) the formalities and operating procedures of the Fund. On 21 June 2010 the Ministry of Treasury and Finance (Ministro dell economia e delle finanze) has adopted ministerial decree No. 132 ( Decree 132/2010 ) detailing the requisites and formalities which any Borrower must comply with in order to exercise the Borrower Payment Suspension Right. In particular, under Decree 132/2010 a borrower is entitled to exercise the Borrower Payment Suspension Right if and to the extent that on the date of submission of the relevant request (i) he/she is the owner of the real estate asset relating to the mortgage loan agreement; (ii) the relevant mortgage loan has been granted for an original amount not exceeding 250,000, and the relevant amortisation plan has commenced by at least one year; (iii) the index of the equivalent economic situation (indicatore della situazione economica equivalente - ISEE) should not exceed 30,000; (iv) the relevant real estate asset must not fall in the A/1, A/8 and A/9 cadastral categories, it must not be a luxury real estate as defined under ministerial decree of 2 August 1969 and it must be a "first home" of the borrower at the submission of the application; (v) at least one of the following 37

38 facts occurs after the drawing-up of the mortgage loan agreement: (a) loss of the non self-employed work for an indefinite period or end of the parasubordinate job or similar job, without a new job for at least three months; (b) death or non-self sufficiency of one of the household members earning at least 30 per cent. of the total taxable income of the relevant household; (c) payment of medical or home care expenses for an annual amount of at least 5,000; (d) payment of extraordinary maintenance, refurbishment or similar expenses for annual amount of at least 5,000; (e) an increase of the relevant floating rate mortgage loan instalment of at least 25 per cent. in the case of semi-annual instalments and at least 20 per cent. in the case of monthly instalments. Furthermore, as specified by the Italian Banking Association (Associazione Bancaria Italiana - "ABI"), any borrower meeting the criteria set out above could submit its request for exercising the Borrower Payment Suspension Right in the period comprised from 1 February 2010 and 31 July Prospective investors attention is drawn to the fact that the potential effects of the suspension schemes and the impact thereof on the amortisation and prepayment profile of the Portfolio cannot be predicted by the Issuer as at the date of this Prospectus. Renegotiations of floating rate Mortgage Loans Law Decree No. 93 of 27 May 2008 ( Law Decree 93 ), converted into law No. 126 of 24 July 2008 ( Law 126 ) which came into force on 29 May 2008, regulates the renegotiation of floating rate mortgage loans granted for the purposes of purchasing, building or refurbishing real estate assets used as main houses. According to Law 126, the Ministero dell Economia e delle Finanze (Minister of Economy and Finance) and the ABI (Italian Banking Association) entered into a convention providing for the procedures for the renegotiation of such floating rate mortgage loans (the Convention ). The Convention applies to floating rate mortgage loan agreements entered into or taken over (accollati), also further to the parcelling (frazionamento) of the relevant mortgages, before 29 May Pursuant to the Convention, the instalments payable by a borrower under any of such mortgage loan agreements will be recalculated applying (a) a fixed interest rate (equal to the average of the floating rate interest rates applied under the relevant mortgage loan agreement during 2006) on the initial principal amount and for the original final maturity date of the relevant mortgage loan, or (b) if the mortgage loan has been entered into, renegotiated or taken over (accollato) after 31 December 2006, the parameters used for the calculation of the first instalment due after the date on which the mortgage loan has been entered into, renegotiated or taken over (accollato). The difference between the amount to be paid by the borrower as a result of such recalculation and the amount that the borrower would have paid on the basis of the original instalment plan will be (a) if negative, debited to a bank account on which interest will accrue in favour of the lender at the lower of (i) the rate equal to 10 (ten) IRS (interest rate swap) plus a spread of 0.50, and (ii) the rate applicable pursuant to the relevant mortgage loan, each of them calculated, in a fixed amount, on the renegotiation date, or (b) if positive, credited to such bank account. After the original final maturity date of the mortgage loan, the outstanding debt on the bank account will be repaid by the borrower through constant instalments equal to the ones resulting from the renegotiation, and the amortisation plan will be determined on the basis of the 38

39 lower of (a) the rate applicable on the bank account, and (ii) the rate applicable pursuant to the relevant mortgage loan, as calculated, in a fixed amount, on the original final maturity date of the mortgage loan. The Seller has adhered to the Convention sending to its clients a renegotiation proposal in accordance with the Convention. Borrowers eligible for the renegotiation who have received the renegotiation proposal can accept the proposal by way of a written notification to be sent not later than 28 November 2008 (the Final Adhesion Term ). The renegotiation becomes effective on the third month following the date when such proposal has been accepted by the relevant client, with reference to the instalments which fall due after 1 January Interest cap in relation to floating rate Mortgage Loans Article 2 of law decree No. 185 of 29 November 2008, converted into law No. 2 of 28 January 2009 ( Article 2 ) provides for an interest cap in relation to floating rate mortgage loans granted for the purposes of purchasing, building or refurbishing real estate assets used as main houses before 31 October Article 2 applies also to those floating rate mortgage loans renegotiated in accordance with the Convention. In particular, the interest component of any instalment falling due during the year 2009 will be recalculated by applying the higher of (i) four per cent. (excluding any spread, ancillary expenses or any other additional costs) and (ii) the interest rate provided by the relevant loan agreement as of the relevant execution date (the Interest Cap ). The positive difference between the amount which would have been payable under the original terms of the relevant floating rate mortgage loan and the amount to be paid by the relevant borrower by applying the Interest Cap (the Δ Amount ) will be initially paid by the relevant lender and ultimately borne by the Republic of Italy. Article 2 requires the Italian tax authority (Agenzia delle Entrate) to implement specific regulations setting out, amongst other, the terms for payment of the Δ Amount to the banks by the Republic of Italy. Regulation No issued on 29 December 2008 by the Italian Ministry of Economy and Finance has clarified that, in case of mortgage loans which have subject to a securitisation or covered bonds transaction, such Δ Amount shall be paid by the relevant seller or by the entity appointed as soggetto incaricato della riscossione dei crediti ceduti e dei servizi di cassa e pagamento (which, in the context of the Programme, is the Servicer) pursuant to Law 130. Regulation No issued on 13 February 2009 by the Italian Ministry of Economy and Finance has further clarified that the Δ Amount shall be paid on the date falling on the scheduled instalment date of the relevant mortgage loan. The pieces of legislation referred to in each subparagraph under section Mortgage borrower protection above may have an adverse effect on the Portfolio and, in particular, on any cash flow projections concerning the Portfolio as well as on the over-collateralisation required in order to maintain the then current ratings of the OBG. However, as this legislation is relatively new, as at the date of this Prospectus, the Issuer is not in a position to predict its impact. For further information, see Selected Aspects of Italian Law, below. 39

40 3. Factors which are material for the purpose of assessing the market risks associated with OBG issued under the Programme The OBG may not be a suitable investment for all investors Each potential investor in the OBG must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: (i) have sufficient knowledge and experience to make a meaningful evaluation of the OBG, the merits and risks of investing in the OBG and the information contained or referred to in this Prospectus or any applicable supplement; (ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the OBG and the impact the OBG will have on its overall investment portfolio; (iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the OBG, including OBG with principal or interest payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor s currency; (iv) understand thoroughly the terms of the OBG and be familiar with the behaviour of any relevant indices and financial markets; and (v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. Some OBG are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in OBG which are complex financial instruments unless it has the expertise (either alone or with a financial adviser) to evaluate how the OBG will perform under changing conditions, the resulting effects on the value of the OBG and the impact this investment will have on the potential investor s overall investment portfolio. Risks related to the structure of a particular issue of OBG OBG issued under the Programme will either be fungible with an existing Series or Tranche or have different terms to an existing Series or Tranche (in which case they will constitute a new Series or Tranche as the case may be). All OBG issued from time to time will rank pari passu with each other in all respects and will share equally in the security granted by the OBG Guarantor under the OBG Guarantee. If an Issuer Event of Default and a Guarantor Event of Default occur and result in acceleration, all OBG of all Series or Tranche will accelerate at the same time. A wide range of OBG may be issued under the Programme. A number of these OBG may have features which contain particular risks for potential investors. Set out below is a description of the most common of such features. OBG subject to optional redemption by the Issuer 40

41 An optional redemption feature of OBG is likely to limit their market value. During any period when the Issuer may elect to redeem OBG, the market value of those OBG generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period. The Issuer may be expected to redeem OBG when its cost of borrowing is lower than the interest rate on the OBG. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the OBG being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time. Index Linked OBG and Dual Currency OBG The Issuer may issue OBG with interest or principal payments determined by reference to an index or formula, to changes in the prices of securities or commodities, to movements in currency exchange rates or other factors (each a Relevant Factor ). In addition, the Issuer may issue OBG with principal or interest payable in one or more currencies which may be different from the currency in which the OBG are denominated. Prospective investors should be aware that: (i) the market price of such OBG may be very volatile; (ii) they may receive no interest; (iii) payment of principal or interest may occur at a different time or in a different currency than expected; (iv) the Relevant Factor may be subject to significant fluctuations that may not correlate with changes in interest rates, currencies or other indices; (v) if a Relevant Factor is applied to OBG in conjunction with a multiplier greater than one or contains some other leverage factor, the effect of changes in the Relevant Factor on principal or interest payable likely will be magnified; and (vi) the timing of changes in a Relevant Factor may affect the actual yield to investors, even if the average level is consistent with their expectations. In general, the earlier the change in the Relevant Factor, the greater the effect on yield. Zero Coupon OBG The Issuer may issue OBG which do not pay current interest but are issued at a discount from their nominal value or premium from their principal amount. Such OBG are characterised by the circumstance that the relevant OBG holders, instead of benefitting from periodical interest payments, shall be granted an interest income consisting in the difference between the redemption price and the issue price, which difference shall reflect the market interest rate. A holder of a zero coupon OBG is exposed to the risk that the price of such bond falls as a result of changes in the market interest rate. Prices of zero coupon OBG are more volatile than prices of fixed rate OBG and are likely to respond to a greater degree to market interest rate changes than interest bearing OBG with a similar maturity. Generally, the longer the remaining terms of such OBG, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities. 41

42 Credit-Linked OBG and Equity-Linked OBG The Issuer may issue Credit-Linked OBG in which the relevant obligation to pay interest and/or principal is linked to the credit of one or more reference entities. There is no guarantee that the holders will receive the full principal amount of such OBG or any interest thereon and ultimately the obligations of the Issuer to pay principal under such OBG may even be reduced to zero. The Issuer may also issue Equity-Linked OBG in which the payment of principal and/or interest will be calculated by reference to the value of certain underlying shares. For their features, both Credit- Linked OBG and Equity-Linked OBG should be purchased by sophisticated investors that are able to adequately assess the risks connected with an investment in Credit-Linked OBG or Equity- Linked OBG. Variable Rate OBG with a multiplier or other leverage factor OBG with variable interest rates can be volatile investments. If they are structured to include multipliers or other leverage factors, or caps, floors or collars (or any combination of those features or other similar related features), their market values may be even more volatile than those for securities that do not include those features. Fixed/Floating Rate OBG Fixed/Floating Rate OBG may bear interest at a rate that the Issuer may elect to convert from a fixed rate to a floating rate or from a floating rate to a fixed rate. The Issuer s ability to convert the interest rate will affect the secondary market and the market value of the OBG since the Issuer may be expected to convert the rate when it is likely to produce a lower overall cost of borrowing. If the Issuer converts from a fixed rate to a floating rate, the spread on the Fixed/Floating Rate OBG may be less favourable than then prevailing spreads on comparable Floating Rate OBG tied to the same reference rate. In addition, the new floating rate at any time may be lower than the rates on other OBG. If the Issuer converts from a floating rate to a fixed rate, the fixed rate may be lower than then prevailing rates on its OBG. OBG issued at a substantial discount or premium The market values of securities issued at a substantial discount or premium from their principal amount tend to fluctuate more in relation to general changes in interest rates than do prices for conventional interest-bearing securities. Generally, the longer remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities. Risks related to OBG generally Set out below is a brief description of certain risks relating to the OBG generally. Certain decisions of OBG Holders taken at Programme level Any Programme Resolution to direct the Representative of the OBG Holders to serve a Notice to Pay or a Guarantor Acceleration Notice, and any direction to the Representative of the OBG Holders to take any enforcement action must be passed at a single meeting of the holders of all OBG of all Series then outstanding as set out in the Rules of the Organisation of OBG Holders attached to the Conditions as Schedule 1 and cannot be decided upon at a meeting of OBG Holders 42

43 of a single Series or Tranche. A Programme Resolution will be binding on all OBG Holders including OBG Holders who did not attend and vote at the relevant meeting and OBG Holders who voted in a manner contrary to the majority. The Representative of the OBG Holders may agree to modifications to the Transaction Documents without the OBG Holders or other Secured Creditors (as defined below) prior consent. The Representative of the OBG Holders may, without the consent or sanction of any of the OBG Holders or any of the other Secured Creditors, concur with the Issuer and/or the OBG Guarantor and any relevant parties in making any modification as follows: (i) to the Conditions and/or the other Transaction Documents which in the opinion of the Representative of the OBG Holders may be expedient to make provided that the Representative of the OBG Holders is of the opinion that such modification will be proper to make and will not be materially prejudicial to the interests of any of the OBG Holders of any Series or Tranche; and (ii) to the Conditions or the other Transaction Documents which is of a formal, minor or technical nature or, which in the opinion of the Representative of the OBG Holders is to correct a manifest error or an error established as such to the satisfaction of the Representative of the OBG Holders or for the purpose of clarification or to comply with mandatory provisions of law and regulation or in general interpretation of laws and regulations. The transaction documents provide that under certain circumstances (e.g. changes in the portfolio composition, changes in laws or in general interpretation of laws, amendments to the eligibility criteria, etc.) certain provisions of the Transaction Documents may be amended without the prior approval of the Representative of the OBG Holders and of the OBG Holders. For further details please refer to "Limited description of the Portfolio" in this Section and the "Description of the Transaction Documents". Controls over the transaction The BoI OBG Regulations require that certain controls be performed by the Issuer (also in its capacity as Seller) (see Selected aspects of Italian law - Controls over the transaction below), aimed, inter alia, at mitigating the risk that any obligation of the Issuer or the OBG Guarantor under the OBG is not complied with. Whilst the Issuer (also in its capacity as Seller) believes it has implemented the appropriate policies and controls in compliance with the relevant requirements, investors should note that there is no assurance that such compliance ensures that the aforesaid payment obligations are actually performed and that any failure to properly implement the relevant policies and controls could have an adverse effect on the Issuers or the OBG Guarantor s ability to perform their obligations under the OBG. Limits to the Integration Under the BoI OBG Regulations, the Integration (as defined below), whether through Assets or through Integration Assets shall be carried out in accordance with the modalities, and subject to the limits, set out in the BoI OBG Regulations (see Selected aspects of Italian law - Tests set out in the MEF Decree). 43

44 More specifically, under the BoI OBG Regulations, the Integration is allowed exclusively for the purpose of (a) complying with the Mandatory Tests (as defined below); (b) complying with any contractual overcollateralisation requirements agreed by the parties to the relevant agreements or (c) complying with the 15% maximum amount of Integration Assets within the Portfolio. Investors should note that the Integration is not allowed in circumstances other than as set out in the BoI OBG Regulations and specified above. Tax consequences of holding the OBG Potential investors should consider the tax consequences of investing in the OBG and consult their tax adviser about their own tax situation. Prospectus to be read together with applicable Final Terms The terms and conditions of the OBG and the terms and conditions of the Registered OBG apply to the different types of OBG which may be issued under the Programme. The full terms and conditions applicable to each Series or Tranche of OBG (other than the Registered OBG) can be reviewed by reading the Conditions as set out in full in this Prospectus, which constitute the basis of all OBG to be offered under the Programme (other than the registered OBG), together with the applicable Final Terms which applies and/or disapplies, supplements and/or amends the master Terms and Conditions of the Programme in the manner required to reflect the particular terms and conditions applicable to the relevant Series of OBG (or Tranche thereof). The full terms and conditions applicable to each Series of Registered OBG can be reviewed by reading the relevant Registered OBG, the relevant Registered OBG Conditions and any schedule or ancillary agreement attached or relating thereto. Liability to make payments when due on the OBG The Issuer is liable to make payments when due on the OBG. The obligations of the Issuer under the OBG are direct, unsecured, unconditional and unsubordinated obligations, ranking pari passu without any preference amongst themselves and equally with its other direct, unsecured, unconditional and unsubordinated obligations. Consequently, any claim directly against the Issuer in respect of the OBG will not benefit from any security or other preferential arrangement granted by the Issuer. The OBG Guarantor has no obligation to pay the Guaranteed Amounts payable under the OBG Guarantee until the service on the OBG Guarantor of a Notice to Pay. Failure by the OBG Guarantor to pay amounts due under the OBG Guarantee in respect of any Series or Tranches would constitute a Guarantor Event of Default which would entitle the Representative of the OBG Holders to serve a Guarantor Acceleration Notice and accelerate the obligations of the OBG Guarantor under the OBG Guarantee and entitle the Representative of the OBG Holders to enforce the OBG Guarantee. The OBG will not represent an obligation or be the responsibility of any of the Dealers, the Representative of the OBG Holders or any other party to the Transaction Documents, their officers, members, directors, employees, security holders or incorporators, other than the Issuer and the OBG Guarantor. The Issuer and the OBG Guarantor will be liable solely in their corporate capacity for their obligations in respect of the OBG and such obligations will not be the obligations of their respective officers, members, directors, employees, security holders or incorporators. 44

45 Risks related to the market generally Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk. Secondary Market OBG may have no established trading market when issued, and one may never develop. If a market does develop, it may not be very liquid. Therefore, investors may not be able to sell their OBG easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for OBG that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of OBG generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severely adverse effect on the market value of OBG. In addition, OBG issued under the Programme might not be listed on a stock exchange or regulated market and, in these circumstances, pricing information may be more difficult to obtain and the liquidity and market prices of such OBG may be adversely affected. In an illiquid market, an investor might not be able to sell his OBG at any time at fair market prices. The possibility to sell the OBG might additionally be restricted by country specific reasons. Exchange rate risks and exchange controls The Issuer will pay principal and interest on the OBG in the Specified Currency. This presents certain risks relating to currency conversions if an investor s financial activities are denominated principally in a currency or currency unit (the Investor s Currency ) other than the Specified Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor s Currency) and the risk that authorities with jurisdiction over the Investor s Currency may impose or modify exchange controls. An appreciation in the value of the Investor s Currency relative to the Specified Currency would decrease (1) the Investor s Currency-equivalent yield on the OBG, (2) the Investor s Currency equivalent value of the principal payable on the OBG and (3) the Investor s Currency equivalent market value of the OBG. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal. Interest rate risks Investment in Fixed Rate OBG involves the risk that subsequent changes in market interest rates may adversely affect the value of the Fixed Rate OBG. Credit ratings may not reflect all risks One or more independent credit rating agencies may assign credit ratings to the OBG. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the OBG. A credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn by the rating agency at any time. 45

46 The return on an investment in OBG will be affected by charges incurred by investors An investor s total return on an investment in any OBG will be affected by the level of fees charged by the nominee service provider and/or clearing system used by the investor. Such a person or institution may charge fees for the opening and operation of an investment account, transfers of OBG, custody services and on payments of interest, principal and other amounts. Potential investors are therefore advised to investigate the basis on which any such fees will be charged on the relevant OBG. EU Savings Directive Legislative Decree No. 84 of 18 April 2005 implemented in Italy, as of 1 July 2005, the European Council Directive No. 2003/48/EC on the taxation of savings income. Under the Directive, Member States, if a number of important conditions are met, are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State. However, for a transitional period, Belgium, Luxembourg and Austria will instead be required (unless during that period they elect otherwise) to operate a withholding tax system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries). Same details concerning payment of interest (or similar income) shall be provided to the tax authorities of a number of non-eu countries and territories, which have agreed to adopt similar measures with effect from the same date. If a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor the OBG Guarantor or any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any OBG as a result of the imposition of such withholding tax. The Issuer will be required to maintain a Paying Agent in a Member State that will not be obliged to withhold or deduct tax pursuant to the Savings Directive. Change of law The structure of the Programme and inter alia the issue of the OBG and the ratings assigned to the OBG are based on Italian law, tax and administrative practice in effect at the date of this Prospectus, and having due regard to the expected tax treatment of all relevant entities under such law and practice. No assurance can be given that Italian law, tax or administrative practice or its interpretation will not change after the Issue Date of any Series or Tranche or that such change will not adversely impact the structure of the Programme and the treatment of the OBG. This Prospectus will not be updated to reflect any such changes or events. Legal investment considerations may restrict certain investments The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (1) OBG are legal investments for it, (2) OBG can be used as collateral for various types of borrowing and (3) other restrictions apply to its purchase or pledge of any OBG. Financial institutions should consult their legal advisers or the appropriate 46

47 regulators to determine the appropriate treatment of OBG under any applicable risk-based capital or similar rules. 47

48 GENERAL DESCRIPTION OF THE PROGRAMME The following section contains a general description of the Programme and, as such, does not purport to be complete and is qualified in its entirety by the remainder of this Prospectus and, in relation to the terms and conditions of any Series or Tranche, the applicable Final Terms. Prospective purchasers of OBG should carefully read the information set out elsewhere in this Prospectus prior to making an investment decision in respect of the OBG. In this section, references to a numbered condition are to such condition in "Terms and Conditions of the OBG" below. Certain terms used in this section, but not defined, may be found in other sections of this Prospectus, unless otherwise stated. An index of defined terms is contained at the end of this Prospectus, commencing on page The Principal Parties Issuer OBG Guarantor UniCredit S.p.A. (the Issuer or UniCredit ) is a bank organised and existing under the laws of the Republic of Italy, whose registered office is at Via A. Specchi 16, 00186, Rome, Italy, head office at Piazza Cordusio, Milan, with Fiscal Code, VAT number and registration number with the companies register of Rome and head office in Piazza Cordusio, Milan, Italy, and registered with the Bank of Italy pursuant to article 13 of of Italian legislative decree No. 385 of 1 September 1993 (the Banking Law ) under number , parent company of the the Gruppo Bancario UniCredit registered with the register of banking groups held by the Bank of Italy pursuant to article 64 of the Banking Act under number (the UniCredit Banking Group or the Group or the UniCredit Group ), member of the Fondo Interbancario di Tutela dei Depositi and the Fondo Nazionale di Garanzia. See Description of the Issuer, below. UniCredit BpC Mortgage S.r.l. (the OBG Guarantor ) is a limited liability company incorporated in the Republic of Italy under article 7-bis of Italian law No. 130 of 30 April 1999 (disposizioni sulla cartolarizzazione dei crediti), as amended from time to time (the Law 130 ). The OBG Guarantor is registered with the companies register of Verona under number , with the general register (elenco generale) pursuant to article 106 of the Banking Law under number The registered office of the OBG Guarantor is at Piazzetta Monte, 1, I Verona, Italy and its tax identification number (codice fiscale) is

49 Seller The OBG Guarantor is directed and co-ordinated (soggetta all attività di direzione e coordinamento) by UniCredit and belongs to the UniCredit Banking Group. The issued capital of the OBG Guarantor is equal to Euro 12,000, 60% owned by UniCredit and 40% owned by SVM Securitisation Vehicles Management S.r.l. (the Shareholder ), an Italian joint stock company (società per azioni), with registered office at Via Alfieri, 1, I Conegliano (Treviso), Italy, and is registered with the register held by the Bank of Italy pursuant to article 106 of the Banking Act under number See Description of the OBG Guarantor, below. UniCredit is the seller (in such capacity, the Seller ). See Description of the Issuer, below. Pursuant to the terms of a master transfer agreement dated 29 August 2008, as amended on 14 October 2008 (the Master Transfer Agreement ) between the OBG Guarantor and the Seller, the Seller (a) sold an initial portfolio comprising Residential Mortgage Receivables (the Initial Portfolio ) to the OBG Guarantor and (b) agreed the terms upon which it may assign and transfer Assets and/or Integration Assets (in each case as defined below) satisfying the Criteria (as defined below) to the OBG Guarantor from time to time, on a revolving basis in the cases and subject to the limits referred to in section Creation and administration of the Portfolio below. On 29 May 2009, the Seller and the OBG Guarantor have entered into a sale agreement pursuant to which the OBG Guarantor has purchased, in accordance with the Master Transfer Agreement, a New Portfolio with economic effect as at 1 April 2009 comprising Residential Mortgage Receivables selected in accordance with the General Criteria and the Specific Criteria (the May 2009 New Portfolio ). On 13 November 2009, the Seller and the OBG Guarantor have entered into a sale agreement pursuant to which the OBG Guarantor has purchased, in accordance with the Master Transfer Agreement, a New Portfolio with economic effect as at 1 November 2009 comprising Residential Mortgage Receivables selected in accordance with the General Criteria and the Specific Criteria (the November 2009 New Portfolio ). 49

50 Subordinated Loan Provider Dealers Sole Arranger On 21 May 2010, the Seller and the OBG Guarantor have entered into a sale agreement pursuant to which the OBG Guarantor has purchased, in accordance with the Master Transfer Agreement, a New Portfolio with economic effect as at 1 May 2010 comprising Residential Mortgage Receivables selected in accordance with the General Criteria and the Specific Criteria (the May 2010 New Portfolio ). UniCredit is the subordinated loan provider (in such capacity, the Subordinated Loan Provider ) pursuant to the terms of a subordinated loan agreement dated 14 October 2008 (the Subordinated Loan Agreement ) between the OBG Guarantor, the Representative of the OBG Holders and the Subordinated Loan Provider pursuant to which the Subordinated Loan Provider has agreed to grant to the OBG Guarantor a subordinated loan in an aggregate maxim amount, save for further increases which may determined unilaterally by the Subordinated Loan Provider, equal to 7,500,000,000 (the Subordinated Loan ). Following the determination to that effect, the maximum amount of the Subordinated Loan has been increased and is currently equal to 17,500,000,000. UniCredit Bank AG is a German bank incorporated under German law as a public company limited by shares (Aktiengesellschaft), registered with the Commercial Register administered by the Local Court of Munich, Federal Republic of Germany at number HR B It belongs to the UniCredit Banking Group and has its registered office at Kardinal-Faulhaber-Strasse 1, D Munich, Federal Republic of Germany. UniCredit Bank AG is the dealer ( UniCredit Bank ). The Issuer may from time to time terminate the appointment of any dealer under the Programme or appoint additional dealers either in respect of one or more Tranches, one or more Series, or in respect of the whole Programme. UniCredit Bank AG, London Branch is registered as a foreign branch with The Companies House of England and Wales under number BR UniCredit Bank AG, London Branch, acting through its offices at Moor House 120, London Wall, London EC2Y 5ET, United 50

51 Servicer Administrative Services Provider Portfolio Manager Asset Monitor Kingdom, is the sole arranger (in such capacity, the Sole Arranger ). UniCredit (in such capacity, the Servicer ) will administer the Portfolio on behalf of the Issuer pursuant to the terms of a servicing agreement dated 29 August 2008, as subsequently amended, between the Issuer and the Servicer (the Servicing Agreement ). UniCredit Credit Management Bank S.p.A. is a bank incorporated as a joint stock company (società per azioni) under the laws of the Republic of Italy, fiscal code and registration number with the companies register of Verona , VAT number , with registered office at Piazzetta Monte, 1, I Verona, Italy, registered under number (codice meccanografico) with the register of banks (albo delle banche) held by the Bank of Italy pursuant to article 13 of the Banking Law, member of the Fondo Interbancario di Tutela dei Depositi and of the Fondo Nazionale di Garanzia ( UCMB ). UCMB is a company with a sole shareholder and is directed and co-ordinated (soggetta all attività di direzione e coordinamento) by UniCredit and belongs to the UniCredit Banking Group. UCMB is the administrative services provider to the OBG Guarantor (the Administrative Services Provider ). Pursuant to the terms of an administrative services services agreement dated the Initial Execution Date (the Administrative Services Agreement ), the Administrative Services Provider has agreed to provide certain administrative and secretarial services to the OBG Guarantor. The entity to be appointed under the Portfolio Administration Agreement (as defined below) in order to carry out certain activities in connection with the sale of the Assets or Integration Assets, following the occurrence of an Issuer Event of Default (as defined below) (the Portfolio Manager ). Mazars S.p.A., is incorporated as a joint stock company (società per azioni) under the laws of the Republic of Italy, having its registered office at Corso di Porta Vigentina, 35, 20122, Milan, Italy, fiscal code and enrolment with the companies register of Milan number , registered under number with the 51

52 Cash Manager Account Bank Calculation Agent special register of accounting firms held by CONSOB pursuant to article 161 of the Financial Services Act, is the asset monitor under the Programme (the Asset Monitor ). UniCredit, or any other person for the time being acting as such, is the cash manager to the OBG Guarantor (in such capacity, the Cash Manager ) pursuant to the terms of a cash management and agency agreement dated 14 October 2008, as amended from time to time, between the Issuer, the OBG Guarantor, the Representative of the OBG Holders, the Calculation Agent, the Cash Manager, the Paying Agent and the Administrative Services Provider, as subsequently amended (the Cash Management and Agency Agreement ). The Cash Manager will perform certain cash management functions on behalf of the OBG Guarantor. See General Description of the Programme Description of the Transaction Documents, Accounts and Cash Flows, Description of the Transaction Documents and Description of the Issuer, below. UniCredit, or any other person for the time being acting as such, is the account bank to the OBG Guarantor in respect of certain of the OBG Guarantor s bank accounts (in such capacity, the Account Bank ) pursuant to the terms of the Cash Management and Agency Agreement. The Account Bank has opened, and will maintain, certain bank accounts in the name of the OBG Guarantor and will operate such accounts in the name and on behalf of the OBG Guarantor. See General Description of the Programme Description of the Transaction Documents, Accounts and Cash Flows, Description of the Transaction Documents and Description of the Issuer, below. UniCredit Bank AG, acting through its London branch with offices at Moor House 120, London Wall, London EC2Y 5ET, United Kingdom, or any other person for the time being acting as such, is the calculation agent (in such capacity, the Calculation Agent ) pursuant to the terms of the Cash Management and Agency Agreement. See General Description of the Programme Description of the Transaction Documents, Accounts and Cash Flows and Description of the Transaction Documents - Description of the Cash Management and Agency 52

53 Additional Calculation Agent OBG Hedging Counterparties Agreement and of the Calculation Agency Agreement, below. Capital and Funding Solutions S.r.l. is a company incorporated as a limited liability company with sole quotaholder (societá a responsabilita limitata uninominale) organised under the laws of the Republic of Italy, registered with the companies register held in Bergamo, Italy, at number , fiscal code and VAT number ( Capital Solutions ). Capital Solutions, or any other person for the time being acting as such, is the additional calculation agent (the Additional Calculation Agent ). See General Description of the Programme Description of the Transaction Documents, Accounts and Cash Flows and Description of the Transaction Documents - Description of the Cash Management and Agency Agreement and of the Calculation Agency Agreement, below. UniCredit, or any successor OBG hedging counterparty appointed from time to time (in such capacity, the Initial OBG Hedging Counterparty ) and any other entities that, from time to time, will enter into the OBG Front Swap Agreements (as defined below) for the hedging of currency risk and/or interest rate risk on the OBG (each an OBG Hedging Counterparty and, together with the Initial OBG Hedging Counterparty, the OBG Hedging Counterparties ). Portfolio Hedging Counterparties UniCredit, or any successor Portfolio hedging counterparty appointed from time to time (in such capacity, the Initial Portfolio Hedging Counterparty ) and any other entities that, from time to time, will enter into the Portfolio Front Swap Agreements (as defined below) for the hedging of currency risk and/or interest rate risk on the Portfolio (each a Portfolio Hedging Counterparty and, together with the Initial Portfolio Hedging Counterparty, the Portfolio Hedging Counterparties ). Mirror Hedging Counterparties UniCredit, or any successor mirror hedging counterparty appointed from time to time (in such capacity, the Initial Mirror Hedging Counterparty ) and any other entities that, from time to time, will enter into the Mirror Swap Agreements (as defined below) for the hedging of 53

54 Paying Agent Luxembourg Listing Agent Registrar currency risk and/or interest rate risk on the Portfolio Front Swap Agreements or the OBG Front Swap Agreements (each a Mirror Hedging Counterparty and, together with the Initial Mirror Hedging Counterparty, the Mirror Hedging Counterparties ). BNP Paribas Securities Services S.A., a French société anonyme with capital stock of Euro 165,279,835, having its registered office at Rue d Antin, Paris, France, operating for the purposes hereof through its Milan Branch located in Via Ansperto, 5, I Milan, Italy, registered with the companies register held in Milan, Italy at number , fiscal code and VAT number , enrolled in register of banks (albo delle banche) held by the bank of Italy at number 5483, or any other person for the time being acting as such, is the paying agent in respect of the OBG and on behalf of the Issuer (the Paying Agent ) pursuant to the terms of the Cash Management and Agency Agreement. The Paying Agent has opened, and will maintain the Payments Account, the Eligible Investments Account and the Security Account (in each case as defined below) in the name of the OBG Guarantor and will operate such accounts in the name and on behalf of the OBG Guarantor. See General Description of the Programme Description of the Transaction Documents, Accounts and Cash Flows and Description of the Transaction Documents, below. Any reference to the Paying Agent included in this Prospectus, shall include, for the avoidance of doubt, any reference to any Registered Paying Agent (as defined below) appointed by the Issuer in relation to a specific Series of Registered OBG. BNP Paribas Securities Services, Luxembourg Branch, a French société anonyme with capital stock of Euro 165,279,835, having its registered office at Rue d Antin, Paris, France, operating for the purpose hereof through its Luxembourg Branch located in 33, Rue de Gasperich Howald-Hesperange, L-2085 Luxembourg, or any other person for the time being acting as such, is the Luxembourg listing agent (in such capacity, the Luxembourg Listing Agent ). Any institution which may be appointed by the Issuer to act as registrar in respect of the Registered OBG under 54

55 Registered Paying Agent Representative of the OBG Holders Rating Agencies Additional Sellers the Programme (the Registrar ), provided that if the Issuer will keep the register and will not delegate such activity, any reference to the Registrar will be construed as a reference to the Issuer. Any institution appointed by the Issuer to act as paying agent in respect of the Registered OBG issued under the Programme, if any (the Registered Paying Agent ). If the Issuer so elects, it may act as Registered Paying Agent. Securitisation Services S.p.A. is the representative of the holders of the OBG (the Representative of the OBG Holders ). Securitisation Services S.p.A. is a joint stock company (società per azioni) organised under the laws of the Republic of Italy, with a share capital of Euro 1,595, (fully paid-up), registered with the companies register of Treviso under number , fiscal code and VAT number , registered with the general register (elenco generale) pursuant to article 106 of the Banking Act under number and has its registered office at via Alfieri, 1, I Conegliano (Treviso), Italy, subject to the activity of management and coordination ( attività di direzione e coordinamento ) of Finanziaria Internazionale Holding S.p.A. Fitch Ratings Limited ( Fitch ), Moody s Investors Service Inc. ( Moody s )and Standard & Poor s Ratings Services, a division of The McGraw-Hill Companies, Inc. ( S&P and, together with Fitch and Moody s, the Rating Agencies ). Whether or not a rating in relation to any Tranche or Series of OBG will be treated as having been issued by a credit rating agency established in the European Union and registered under the CRA Regulation will be disclosed in the relevant Final Terms. The credit ratings included or referred to in this Prospectus have been issued by Fitch, Moody s or S&P, each of which is established in the European Union and each of which has applied to be registered under the CRA Regulation. Any bank (each an Additional Seller ) other than the Seller which is a member of the UniCredit Banking Group that will sell Assets or Integration Assets (as defined below) to the OBG Guarantor, subject to 55

56 Ownership or control relationships between the principal parties satisfaction of certain conditions (which shall include confirmation from the Rating Agencies that the assignment by the Additional Sellers would not adversely affect the then current rating of the existing OBG), and that, for such purpose, shall, inter alia, enter into a master transfer agreement, substantially in the form of the Master Transfer Agreement and shall accede the Intercreditor Agreement (which will be amended in order to take into account the granting of additional subordinated loans) and become a party to the Portfolio Administration Agreement. As of the date of this Prospectus, no direct or indirect ownership or control relationships exist between the principal parties described above in this Section, other than the relationships existing between the Issuer (which, in the context of the Programme, acts also as Servicer, Seller, Subordinated Loan Provider, Account Bank, Cash Manager, Initial OBG Hedging Counterparty, Initial Portfolio Hedging Counterparty and Initial Mirror Hedging Counterparty), the OBG Guarantor, the Sole Arranger, the Calculation Agent, the Dealer and the Administrative Services Provider, all of which belong to the UniCredit Banking Group. The entities belonging to the UniCredit Banking Group are subject to the direction and coordination (direzione e coordinamento) of the Issuer. 2 Summary of the OBG and the Programme Description Size Distribution Issue Price 20,000,000,000 OBG Programme. Up to 20,000,000,000 at any time (and for this purpose, any OBG denominated in another currency shall be translated into Euro at the date of the agreement to issue such OBG) in aggregate principal amount of OBG outstanding at any time (the Programme Limit ). The Programme Limit may be increased in accordance with the terms of the Dealer Agreement. The OBG may be distributed on a syndicated or nonsyndicated basis. OBG of each Series or Tranche may be issued at an issue price which is at par or at a discount to, or premium over, par, as specified in the relevant Final Terms (in each case, the Issue Price for such Series or Tranche). 56

57 Form of OBG The OBG may be issued in dematerialised form or in registered form as Registered OBG. The OBG issued in bearer form and in dematerialised form (emesse in forma dematerializzata) will be wholly and exclusively deposited with Monte Titoli in accordance with article 83-bis of of Italian legislative decree No. 58 of 24 February 1998, as amended, through the authorised institutions listed in article 83-quater of such legislative decree. The OBG will be held by Monte Titoli on behalf of the OBG Holders until redemption and cancellation for the account of each relevant Monte Titoli Account Holder. Monte Titoli shall act as depository for Clearstream, Luxembourg and Euroclear. The OBG will at all times be in book entry form and title to the OBG will be evidenced by book entries in accordance with: (i) the provisions of article 83-bis of of Italian legislative decree No. 58 of 24 February 1998, as amended; and (ii) the regulation issued by the Bank of Italy and the Commissione Nazionale per le Società e la Borsa ( CONSOB ) on 22 February 2008, as subsequently amended. No physical document of title will be issued in respect of the OBG. Registered OBG will be issued to each holder in the form of Namensschuld verschreibung, each issued with a minimum denomination indicated in the applicable Registered OBG Conditions attached thereto, together with the execution of the related Registered OBG side agreement, in the form from time to time agreed with the relevant Dealer, (each, a Registered OBG Agreement ) in relation to a specific issue of Registered OBG. The relevant Registered OBG (Namensschuld verschreibung), together with the related Registered OBG Conditions attached thereto, the relevant Registered OBG Agreement and any other document expressed to govern such Series of Registered OBG, will constitute the full terms and conditions of the relevant Series of Registered OBG. In connection with each Registered OBG, each reference in the Prospectus to information being set out, specified, stated, shown, indicated or otherwise provided for in the applicable Final Terms shall be read and construed as a reference to such information being set out, specified, stated, shown, indicated or otherwise provided in the 57

58 Currencies Maturities Denominations relevant Registered OBG (Namensschuldverschreibung), the relevant Registered OBG Conditions, the Registered OBG Agreement relating thereto or any other document expressed to govern such Registered OBG and, as applicable, each other reference to Final Terms in the Prospectus shall be construed and read as a reference to such Registered OBG (Namensschuldverschreibung), the relevant Registered OBG Conditions, the Registered OBG Agreement thereto or any other document expressed to govern such Registered OBG. A transfer of Registered OBG shall not be effective until the transferee has delivered to the Registered OBG Registrar a duly executed Assignment Agreement. A transfer can only occur for the minimum denomination indicated in the applicable Registered OBG Conditions or multiples thereof. In connection with Registered OBG, references in this Prospectus to the Conditions or a particularly numbered Condition shall be construed, where relevant (and unless specified otherwise), as references to the equivalent Condition in the relevant Registered OBG Conditions as supplemented by the relevant Registered OBG Agreement and/or any other applicable document. The OBG may be denominated in Euro, UK Sterling, Swiss Franc, Japanese Yen and US Dollar, as specified in the applicable Final Terms or in any other currency, as may be agreed between the Issuer and the relevant Dealer(s) (each, together with Euro, a Specified Currency ), subject to compliance with all applicable legal and/or regulatory and/or central bank requirements, in which case the Issuer may enter into certain agreements in order to hedge inter alia its currency exchange exposure in relation to such OBG. Payments in respect of OBG may, subject to such compliance, be made in or linked to, any currency other than the currency in which such OBG are denominated. Subject to compliance with all relevant laws, regulations and directives, any maturity not lower than 24 months. In accordance with the Conditions, OBG will be issued in such denominations as may be specified in the relevant Final Terms, subject to compliance with all applicable legal or regulatory or central bank 58

59 Redenominations Minimum Denomination Issue Date OBG Payment Date OBG Interest Period requirements and provided that each Series will have OBG of one denomination only. Registered OBG will be issued in such denominations indicated in the applicable Registered OBG Conditions. OBG denominated in a currency of a country that subsequently participates in the third stage of European Economic and Monetary Union, may be subject to redenomination, renominalisation and/or consolidation with other OBG then denominated in euro. The provisions applicable to any such redenomination, renominalisation and/or consolidation will be as specified in the relevant Final Terms. The minimum denomination of the OBG (other than the Registered OBG) to be issued from the date hereof will be 100,000 and integral multiples of 1,000 in excess thereof (or, if the relevant Series or Tranche of OBG is denominated in a currency other than euro, the equivalent amount in such currency) or such other higher denomination as may be specified in the relevant Final Terms (or its equivalent in another currency as at the date of issue of the relevant Series or Tranche of OBG). The minimum denomination for Registered OBG will be specified in the applicable Registered OBG Conditions. The date of issue of a Series or Tranche pursuant to and in accordance with the Dealer Agreement (in each case, the Issue Date in relation to such Series or Tranche). The date specified as such in, or determined in accordance with the provisions of, the relevant Final Terms and confirmed, where applicable, by the relevant Rating Agencies as not adversely affecting the rating of the then outstanding OBG, provided however that each OBG Payment Date must also be a Guarantor Payment Date and subject in each case, to the extent provided in the relevant Final Terms, to adjustment in accordance with the applicable Business Day Convention (each such date, an OBG Payment Date ). Each period beginning on (and including) an Interest Commencement Date or, in respect of any OBG Interest Period other than the first OBG Interest Period of each Series or Tranche, any OBG Payment Date and ending on (but excluding) the next following OBG Payment Date, provided that the initial OBG Interest Period of the 59

60 Types of OBG First Series or Tranche shall begin on (and include) the Initial Issue Date and end on (but exclude) the first OBG Payment Date ( OBG Interest Period ). Interest Commencement Date means, in relation to any Series or Tranche of OBG, the Issue Date of the relevant Series or Tranche of OBG or such other date as may be specified as the Interest Commencement Date in the relevant Final Terms. In accordance with the relevant Final Terms, the relevant Series or Tranche of OBG may be Fixed Rate OBG, Floating Rate OBG, Index-Linked OBG, Dual Currency OBG, Zero Coupon OBG or a combination of any of the foregoing, depending upon the Interest Basis shown in the applicable Final Terms. The relevant Series or Tranche of OBG may be Index-Linked Redemption OBG, Dual Currency OBG, and OBG repayable in one or more instalments or a combination of any of the foregoing, depending on the Redemption/Payment Basis shown in the applicable Final Terms. Each Series shall be comprised of Fixed Rate OBG only or Floating Rate OBG only or Index-Linked Interest/Redemption OBG only or Zero Coupon OBG only or Dual Currency OBG only or such other OBG accruing interest on such other basis and at such other rate as may be so specified in the relevant Final Terms only. Fixed Rate OBG: fixed interest on the Fixed Rate OBG will be payable in arrear on such date or dates specified in the relevant Final Terms and as may be agreed between the Issuer and the relevant Dealers. Fixed interest will be calculated on the basis of such Day Count Fraction provided for in the Conditions and the relevant Final Terms. Floating Rate OBG: Floating Rate OBG will bear interest determined separately for each Series as follows: (i) on the same basis as the floating rate under a notional interest rate swap transaction in the relevant Specified Currency governed by an agreement incorporating the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc., or (ii) by reference to LIBOR, LIBID, LIMEAN or EURIBOR (or such other benchmark as may be specified in the relevant Final Terms) as adjusted for 60

61 any applicable Margin, in each case as provided for in the relevant Final Terms. The applicable OBG Interest Periods will be specified in the relevant Final Terms. The Margin (if any) relating to such floating rate OBG will be agreed between the Issuer and the relevant Dealer(s) for each Series of Floating Rate OBG and will be specified in the relevant Final Terms. Index-Linked OBG: Payments of principal in respect of Index-Linked Redemption OBG or of interest in respect of Index-Linked Interest OBG will be calculated by reference to such index and/or formula or to changes in the prices of securities or commodities or to such other factors as the Issuer and the relevant Dealer(s) may agree as specified in the applicable Final Terms. Other Linked OBG: OBG may be issued under the Programme which are either Credit Linked OBG or Equity Linked OBG. The specific terms of any linked instruments will be set out in the applicable Final Terms. Credit Linked OBG may be principal protected instruments (in which the relevant obligation to pay interest is linked to the credit of one or more reference entities) and/or full instruments (i.e. instruments whereby the Issuer may redeem either at a cash redemption amount (above or at par) or physically by delivering deliverable obligations upon the occurrence of certain events relating to the credit of one or more reference entities). Equity Linked OBG may be either cash settled (in which payments of principal and/or interest will be calculated by reference to the value of underlying shares, as will be set out in the applicable Final Terms) and/or physically delivered equity instruments (in which the Issuer will deliver a specific number of the underlying shares, other than shares of the Issuer and its subsidiaries, in respect of such instruments). Other provisions in relation to Floating Rate OBG and Index Linked Interest OBG: Floating Rate OBG and Index Linked Interest OBG may also have a maximum interest rate, a minimum interest rate or both. Interest on Floating Rate OBG and Index Linked Interest OBG in respect of each OBG Interest Period, as agreed 61

62 Issuance in Series prior to issue by the Issuer and the relevant Dealers, will be payable on each OBG Payment Date, and will be calculated on the basis of such Day Count Fraction provided for in the Conditions and the relevant Final Terms. Dual Currency OBG: Payments (whether in respect of principal or interest and whether at maturity or otherwise) in respect of Dual Currency OBG will be made in such currencies, and based on such rates of exchange, as the Issuer and the relevant Dealer may agree and as specified in the relevant Final Terms. Zero Coupon OBG: Zero Coupon OBG may be issued and sold at their nominal value or at a discount and will not bear interest. The issuance of certain types of OBG may require a prior amendment to the Transaction Documents by means of the written agreement among the relevant parties thereto and will not require the consent of the Representative of the OBG Holders or the approval of the OBG Holders, but may require, where applicable, confirmation from the Rating Agencies that such amendments would not adversely affect the then current ratings of the outstanding OBG. OBG will be issued in series (each a Series ), but on different terms from each other, subject to the terms set out in the relevant Final Terms in respect of such Series. OBG of different Series will not be fungible among themselves. Each Series (excluding any Series of Registered OBG, which may be Issued only in Series) may be issued in tranches (each a Tranche ) which will be identical in all respects, but having different issue dates, interest commencement dates, issue prices, potentially interest rates, maturity dates and/or dates for first interest payments. The specific terms of each Tranche will be completed in the relevant Final Terms. The Issuer will issue OBG without the prior consent of the holders of any outstanding OBG but subject to certain conditions (See General Description of the Programme - Conditions Precedent to the Issuance of a new series of OBG below). Notwithstanding the foregoing, the term Series shall mean in the case of Registered OBG, each Registered OBG made out in the name of a specific Registered OBG 62

63 Final Terms Interest on the OBG Redemption of the OBG Holder. Specific final terms will be issued and published in accordance with the generally applicable terms and conditions of the OBG (the Conditions ) prior to the issue of each Series or Tranche detailing certain relevant terms thereof which, for the purposes of that Series only or Tranche only (as the case may be), supplements the Conditions and the Prospectus and must be read in conjunction with the Prospectus (each a Final Terms ). The terms and conditions applicable to any particular Series or Tranche of OBG are the Conditions as supplemented, amended and/or replaced by the relevant Final Terms. The terms and conditions applicable to any particular Registered Covered Bond shall be the Registered OBG (Namensschuld verschreibung), the Registered OBG Conditions attached thereto, the relevant Registered OBG Agreement and any other document expressed to govern such particular Registered OBG. Except for the Zero Coupon OBG and unless otherwise specified in the Conditions and the relevant Final Terms, the OBG will be interest-bearing and interest will be calculated, on the relevant dates, on the principal amount outstanding of the relevant OBG (the Principal Amount Outstanding ). Interest will be calculated on the basis of the relevant Day Count Fraction as provided for in the Conditions and in the relevant Final Terms. Interest may accrue on the OBG at a fixed rate or a floating rate or on such other basis and at such rate as may be so specified in the relevant Final Terms or be index-linked and the method of calculating interest may vary between the Issue Date and the Maturity Date of the relevant Series or Tranche. The length of the interest period for the OBG and the applicable interest rate or its method of calculation may differ from time to time or be constant for any Series or Tranche. OBG may have a maximum interest rate, a minimum interest rate, or both. All such information will be set out in the relevant Final Terms. The applicable Final Terms will indicate either (a) that the OBG cannot be redeemed prior to their stated maturity (other than in specified instalments, if applicable, or in 63

64 Redemption by instalments Optional Redemption Early redemption Tax gross up and redemption for taxation reasons other specified cases, e.g. taxation reasons, or Guarantor Events of Default), or (b) that such OBG will be redeemable at the option of the Issuer upon giving prior written notice to the Representative of OBG Holders on behalf of the holders of the OBG (the OBG Holders ) and in accordance with the provisions of Condition 9 (Redemption and Purchase) and of the relevant Final Terms, on a date or dates specified prior to such maturity and at a price or prices and on such other terms as may be agreed between the Issuer and the relevant Dealer(s) (as set out in the applicable Final Terms) or (c) that such will be redeemable at the option of the OBG Holders in accordance with Condition 9(f). The relevant Final Terms will specify the basis for calculating the redemption amounts payable. Any reference to the OBG Holders shall include reference to the holders of the OBG and/or the registered holder for the time being of a Registered OBG (the Registered OBG Holders ) as the context may require. The Final Terms issued in respect of each issue of OBG that are redeemable in two or more instalments will set out the dates on which, and the amounts in which, such OBG may be redeemed. The Final Terms issued in respect of each issue of OBG will state whether such OBG may be redeemed prior to their stated maturity at the option of the Issuer (either in whole or in part) and/or the OBG Holders, and if so the terms applicable to such redemption. Except as provided in Optional Redemption above, OBG will be redeemable at the option of the Issuer prior to maturity only for tax reasons. See Condition 9 (Redemption and Purchase), below. Subject to certain exceptions as provided for in Condition 11 (Taxation), payments in respect of the OBG to be made by the Issuer will be made without deduction for or on account of withholding taxes imposed by any tax jurisdiction, subject as provided in Condition 11 (Taxation). In the event that any such withholding or deduction is made the Issuer will be required to pay additional amounts to cover the amounts so deducted. In such circumstances and provided that such obligation cannot 64

65 Maturity Date Extendable maturity be avoided by the Issuer taking reasonable measures available to it, the OBG will be redeemable (in whole, but not in part) at the option of the Issuer. See Condition 9(c). The OBG Guarantor will not be liable to pay any additional amount due to taxation reasons in case an Issuer Event of Default (as defined below) has occurred. The final maturity date for each Series or Tranche (the Maturity Date ) will be specified in the relevant Final Terms, subject to such minimum or maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the Issuer or the currency of the OBG. Unless previously redeemed as provided in Condition 9 (Redemption and Purchase), the OBG of each Series will be redeemed at their Principal Amount Outstanding on the relevant Maturity Date. The applicable Final Terms may also provide that the obligations of the OBG Guarantor to pay all or (as applicable) part of the Final Redemption Amount (as defined below) payable on the Maturity Date will be deferred pursuant to Condition 9(b) (Extension of maturity) for a maximum period of 12 calendar months following the Maturity Date (the Extended Maturity Date ). Such deferral will occur automatically if: (a) an Issuer Event of Default has occurred; and (b) the OBG Guarantor has insufficient moneys available under the relevant Priority of Payments to pay the Guaranteed Amounts (as defined below) corresponding to the Final Redemption Amount in full in respect ofthe relevant Series of OBG as set out in the relevant Final Terms (the Final Redemption Amount ) on the Maturity Date. In these circumstances, to the extent that the OBG Guarantor has sufficient Available Funds (as defined below) to pay in part - on the relevant Maturity Date - the Final Redemption Amount in respect of the relevant Series or Tranche of OBG, the OBG Guarantor shall make partial payment of the relevant Final Redemption Amount, in accordance with the Post-Issuer Event of Default Priority (as defined below), without any preference among the OBG outstanding, except in respect of the applicable maturity of each Series or 65

66 Tranche. Payment of all unpaid amounts shall be deferred automatically until the applicable Extended Maturity Date, provided that, any amount representing the Final Redemption Amount due and remaining unpaid on the Maturity Date may be paid by the OBG Guarantor on any OBG Payment Date thereafter, up to (and including) the relevant Extended Maturity Date. Status and ranking of the OBG The OBG will constitute direct, unconditional, unsubordinated obligations of the Issuer, guaranteed by the OBG Guarantor pursuant to the terms of the OBG Guarantee (as defined below) with limited recourse to the Available Funds. The OBG will rank pari passu and without any preference among themselves, except in respect of the applicable maturity of each Series or Tranche, and (save for any applicable statutory provisions) at least equally with all other present and future unsecured, unsubordinated obligations of the Issuer having the same maturity of each Series or Tranche of OBG, from time to time outstanding. Limited recourse Conditions precedent to the issuance of OBG In accordance with the legal framework established by Law 130 and the MEF Decree and with the terms and conditions of the relevant Transaction Documents (as defined below), the OBG Holders will have (i) recourse to the Issuer and (ii) limited recourse to the OBG Guarantor limited to the Available Funds. See Credit Structure below. The Issuer may at its option (but shall not be under any obligation to do so), on any date and without the prior consent of the holders of the OBG issued beforehand and of any other creditors of the OBG Guarantor or of the Issuer, issue further Series (or Tranches) of OBG other than the first Series, within the date that falls ten calendar years after the Initial Issue Date and subject to: (i) confirmation from S&P that such further issue would not adversely affect the then current ratings by S&P of the outstanding OBG; (ii) satisfaction of the Over-Collateralisation Test and of the Mandatory Tests, also taking into account the amount of OBG outstanding further to the relevant new issue of OBG; (iii) compliance with (a) the requirements of 66

67 Programme Termination Date Programme Suspension Period issuing/assigning banks (Requisiti delle banche emittenti e/o cedenti; see Section II, Para. 1 of the BoI OBG Regulations; the Conditions to the Issue ) and (b) the limits to the assignment of further Assets set forth in the BoI OBG Regulations (Limiti alla cessione; see Section II, Para. 2 of the BoI OBG Regulations; the Limits to the Assignment ), if applicable; (iv) the corporate duration of the Issuer, or of any successor, has not expired; and (v) no Programme Suspension Period has occurred and is continuing. The payment obligations under the OBG issued under all Series shall be cross-collateralised by all the assets included in the Portfolio, through the OBG Guarantee (as defined below). See also General description of the Programme - Ranking and status of the OBG, below. Programme Termination Date means the later of: (i) the date that falls ten calendar years after the Initial Issue Date; and (ii) the date on which all Series of OBG issued under the Programme have been fully redeemed. During the period starting from the date on which a breach of the Over-Collateralisation Test or any of the Mandatory Tests has been ascertained through the delivery of (i) a Negative Report by the Calculation Agant and (ii) an Asset Monitor Report by the Asset Monitor and ending on the later of (1) the date on which such breach has been cured, (2) the tests are satisfied provided that no Issuer Event of Default (caused by an event other than a breach of any of the Mandatory Test or the Over-Collateralisation Test) has occurred and is continuing (each such period a Programme Suspension Period ): (a) no further payments of interest or repayment on principal to the Seller under the Subordinated Loan (as defined below) (or to any Additional Seller under the relevant additional subordinated loan, if applicable) shall be effected in accordance with the provisions of the relevant subordinated loan agreement and all cash owned by the OBG Guarantor shall be deposited on the relevant 67

68 Listing and admission to trading Settlement Governing law Accounts opened in the name of the OBG Guarantor with the Account Bank, according to the Transaction Documents, (until all OBG are fully repaid or an amount equal to the Required Redemption Amount for each OBG outstanding has been accumulated); and (b) no more purchase price for further Assets and/or Integration Assets (as defined below) will be paid to the Seller (or to the Additional Seller, if applicable), other than through the drawdown of additional advances under the Subordinated Loan or the relevant additional subordinated loan granted by the Additional Seller (if any and as the case may be) but subject to the Limits to the Assignment; and (c) no more OBG may be issued. Application has been made to the Luxembourg Stock Exchange for OBG to be issued under the Programme (other than the Registered OBG) to be admitted to the Official List and to be admitted to trading on the Luxembourg Stock Exchange s regulated market or as otherwise specified in the relevant Final Terms and references to listing shall be construed accordingly. As specified in the relevant Final Terms, a Series of OBG may be unlisted. The applicable Final Terms will state whether or not the relevant OBG are to be listed and, if so, on which stock exchange(s). The Registered OBG will not be listed and/or admitted to trading on any market. Monte Titoli S.p.A. The Registered OBG will not be settled through a clearing system. The OBG (other than the Registered OBG) will be governed by Italian law. The Registered OBG (Namensschuld verschreibung) will be governed by the laws of the Federal Republic of Germany or by whatever law chosen by the Issuer (to be supplemented with the specific provisions required under German law in order for the registered OBG to be a German law registered note (Namensschuld verschreibung) save that, in any case, certain provisions (including those relating to status, limited recourse of the Registered OBG and those applicable to the Issuer and the 68

69 Ratings Selling restrictions Portfolio) shall be governed by Italian law. Each Series or Tranche issued under the Programme may be assigned a rating by one or more of the Rating Agencies if specified in the relevant Final Terms. OBG to be issued under the Programme, if rated, are expected to be rated AAA/Aaa/AAA, respectively from Fitch, Moody s and S&P or as otherwise indicated in the applicable Final Terms. In case the Issuer issues unrated Series of OBG, confirmation that the current rating by S&P of the outstanding OBG is not adversely affected will be requested (where applicable) to S&P. Where a Tranche or Series of OBG is to be rated, such rating will not necessarily be the same as the rating assigned to the OBG already issued. Whether or not a rating in relation to any Tranche or Series of OBG will be treated as having been issued by a credit rating agency established in the European Union and registered under the CRA Regulation will be disclosed in the relevant Final Terms. The credit ratings included or referred to in this Prospectus have been issued by Fitch, Moody s or S&P, each of which is established in the European Union and each of which has applied to be registered under the CRA Regulation. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. The offer, sale and delivery of the OBG and the distribution of offering material in certain jurisdictions including Italy, the United States of America, the United Kingdom shall be subject to the selling restrictions applicable in such countries. See Subscription and Sale below. 3 OBG Guarantee Security for the OBG In accordance with Law 130, pursuant to the OBG Guarantee, the OBG Holders will benefit from a guarantee issued by the OBG Guarantor over a portfolio of receivables transferred or to be transferred by the Seller and the Additional Sellers (if any) (if applicable), arising from some or all of the following assets: (i) residential mortgage receivables, where the relevant amount outstanding, added to the principal amount 69

70 outstanding of any previous mortgage loans secured by the same property, owed to the Seller (or to the Additional Sellers, as applicable), does not exceed 80 per cent. of the value of the mortgaged property (the Residential Mortgage Receivables ; (ii) non residential mortgage receivables, where the relevant amount outstanding, added to the principal amount outstanding of any previous mortgage loans secured by the same property, owed to the Seller (or to the Additional Sellers, as applicable), does not exceed 60 per cent. of the value of the property (the Non-Residential Mortgage Receivables and, together with the Residential Mortgage Receivables, the Mortgage Receivables ); (iii) securities satisfying the requirements set forth under article 2, paragraph 1, letter c) of the MEF Decree (as defined below) (the Public Securities ); and (iv) securities issued in the framework of securitisation transactions where the relevant securitised portfolio is comprised for at least 95 per cent. of underlying assets having the same characteristics described in paragraphs (i) and (ii) above and having a risk weighting not higher than 20% under the prudential standardised approach (the ABS Securities and, together with the Mortgage Receivables and the Public Securities, the Assets ), and, within certain limits, Integration Assets (as defined below). The Assets and the Integration Assets are jointly referred to as the Portfolio ). Under the terms of the OBG Guarantee, following the service of a Notice to Pay (as defined below) on the OBG Guarantor as a result of the occurrence of an Issuer Event of Default (as defined below), the OBG Guarantor will be obliged to pay any amounts due under the OBG as and when the same were originally due for payment by the Issuer. The obligations of the OBG Guarantor under the OBG Guarantee constitute an autonomous guarantee (garanzia autonoma) and certain provisions of the civil code relating to non-autonomous personal guarantees (fidejussioni), as specified in the MEF Decree, shall not 70

71 Issuer Events of Default apply. Accordingly, the obligations of the OBG Guarantor under the OBG Guarantee constitute direct, unconditional, unsubordinated obligations of the OBG Guarantor, limited recourse to the Available Funds, regardless of any invalidity, irregularity, genuiness or unenforceability of any of the guaranteed obligations of the Issuer. Each of the following events with respect to the Issuer shall constitute an Issuer Event of Default : (i) default is made by the Issuer for a period of 7 days or more in the payment of any principal or redemption amount, or for a period of 14 days or more in the payment of any interest on the OBG of any Series when due; or (ii) the Issuer has incurred into a material default in the performance or observance of any of its obligations under or in respect of the OBG (of any Series outstanding) or any of the Transaction Documents to which it is a party (other than any obligation for the payment of principal or interest on the OBG) and (except where, in the opinion of the Representative of the OBG Holders, such default is not capable of remedy in which case no notice will be required), such default remains unremedied for 30 days after the Representative of the OBG Holders has given written notice thereof to the Issuer, certifying that such default is, in its opinion, materially prejudicial to the interests of the OBG Holders and specifying whether or not such default is capable of remedy; or (iii) an Insolvency Event (as defined in the Conditions) occurs in respect of the Issuer; or (iv) the Mandatory Tests or Over-Collateralisation Test have been breached and not cured within 1 month following the delivery by the Calculation Agent of a Negative Report as confirmed by the Asset Monitor Report; or (v) a resolution pursuant to Article 74 of the Banking Law is issued in respect of the Issuer. If an Issuer Event of Default occurs: (a) the Representative of the OBG Holders shall promptly serve a notice (the Notice to Pay ) on the OBG Guarantor declaring that an Issuer Event of 71

72 Default has occurred and specifying, in case of the Issuer Event of Default referred to under paragraph (v) above, that the Issuer Event of Default may have temporary nature; (b) after the service of a Notice to Pay, each Series of OBG will accelerate against the Issuer and they will rank pari passu amongst themselves against the Issuer, provided that (i) such events shall not trigger an acceleration against the OBG Guarantor, (ii) in accordance with Article 4, Para. 3, of the MEF Decree, the OBG Guarantor shall be solely responsible for the exercise of the rights of the OBG Holders vis-à-vis the Issuer and (iii) in case of the Issuer Event of Default referred to under paragraph (v) above (x) the OBG Guarantor, in accordance with the MEF Decree, shall be responsible for the payments of the amounts due and payable under the OBG within the suspension period and (y) upon the end of the suspension period the Issuer shall be responsible for meeting the payment obligations under the OBG (and for the avoidance of doubt, the OBG then outstanding will not be deemed to be accelerated against the Issuer); (c) after the service of a Notice to Pay, the OBG Guarantor will pay any amounts due under the OBG as and when the same were originally due for payment by the Issuer pursuant to the OBG Guarantee and in accordance with the originals terms and maturity set out in the Conditions and the relevant Final Terms; (d) after the service of a Notice to Pay, no further payments to the Seller and/or the Additional Sellers (if any) under the Subordinated Loan and/or, as the case may be, the relevant subordinated loan shall be effected and, until all OBG are fully repaid or an amount equal to the Required Redemption Amount for each Series of OBG outstanding has been accumulated, any residual cash of the OBG Guarantor after making the payments or provisions provided for under items (i) to (iv) of the Post-Issuer Event of Default Priority shall be deposited on the Accounts; 72

73 Guarantor Events of Default (e) after the service of a Notice to Pay and until all OBG are fully repaid or an amount equal to the Required Redemption Amount for each Series of OBG outstanding has been accumulated, no more purchase price for further Assets and/or Integration Assets (as defined below) will be paid to the Seller and/or the Additional Sellers (if any), other than through the drawdown of additional advances under the Subordinated Loan or, as the case may be, the relevant subordinated loan; and (f) after the service of a Notice to Pay, no further Series of OBG may be issued. Following an Issuer Event of Default and the service of a Notice to Pay, each of the following events shall constitute a Guarantor Event of Default : (i) non payment of principal and interest in respect of the relevant Series of OBG in accordance with the OBG Guarantee, subject to an 8 days cure period in respect of principal or redemption amount and a 15 days cure period in respect of interest payment the OBG Guarantor; or (ii) non payment of costs or amount due to any Hedging Counterparty, if ranking senior or pari passu to the OBG by the following Calculation Date in accordance with the relevant Priority of Payments; or (iii) an Insolvency Event occurs in respect of the OBG Guarantor; or (iv) a breach of the obligations of the OBG Guarantor under the Transaction Documents (other than (i) above) occurs which breach is incapable of remedy or, if in the opinion of the Representative of the OBG Holders capable of remedy, is not in the opinion of the Representative of the OBG Holders remedied within 30 days after notice of such breach shall have been given to the OBG Guarantor by the Representative of the OBG Holders; or (v) a breach of the Amortisation Test according to a Negative Report issued by the Calculation Agent as confirmed by the Asset Monitor Report. If a Guarantor Event of Default occurs, the Representative of the OBG Holders: (a) in cases under (i), (ii), (iii) and (v) above, may but 73

74 Cross acceleration Pre-Issuer Event of Default Interest Priority shall, if so directed by an Extraordinary Resolution (as defined in the Conditions) of the OBG Holders, and (b) in case under (iv) above, shall, if so directed by an Extraordinary Resolution of the OBG Holders, serve a notice on the OBG Guarantor (the Guarantor Acceleration Notice ) and all OBG will accelerate against the OBG Guarantor, becoming immediately due and payable, and they will rank pari passu amongst themselves. Calculation Date means, in relation to a Guarantor Payment Date, the day falling 4 Business Days prior to such Guarantor Payment Date. Guarantor Payment Date means (i) before the occurrence of an Issuer Event of Default, 31 January, 30 April, 31 July and 31 October of each year, (ii) following the occurrence of an Issuer Event of Default, the last day of each month starting from the calendar month immediately following the calendar month in which the Issuer Event of Default has occurred, subject in all instances to adjustment in accordance with the Modified Following Business Day Convention and (iii) following the occurrence of a Guarantor Event of Default, each Business Day. If a Guarantor Event of Default has occurred, each OBG will accelerate at the same time against the OBG Guarantor, provided that the OBG does not otherwise contain a cross default provision and will thus not cross accelerate in case of an Issuer Event of Default. On each Guarantor Payment Date, prior to the service of a Notice to Pay, the OBG Guarantor will use Interest Available Funds (as defined below) to make payments in the order of priority set out below (in each case only if and to the extent that payments of a higher priority have been made in full): (i) first, to pay, pari passu and pro rata according to the respective amounts thereof: (a) any OBG Guarantor s documented fees, costs, expenses and taxes to maintain it in good standing, to comply with applicable legislation and to preserve its corporate existence (the Expenses ), to the extent that such costs and expenses have not been already met by 74

75 utilising the amount standing to the credit of the Expenses Account, and (b) all amounts due and payable to the Seller and/or to the Additional Seller (if any) or the party indicated by the Seller or by the Additional Seller (if any) as the case may be, in respect of the insurance premium element of the instalment (if any) collected by the OBG Guarantor during the preceding Collection Period with respect to the outstanding Asset; (ii) second, to pay, pari passu and pro rata according to the respective amounts thereof any amount due and payable (including fees, costs and expenses) to the Representative of the OBG Holders, the Account Bank, the Cash Manager, the Calculation Agent, the Paying Agent, the Luxembourg Listing Agent, the Administrative Services Provider, the Asset Monitor, the Portfolio Manager, the Servicer and the Additional Servicer (if any), and to credit the Target Expenses Amount into the Expenses Account; (iii) third, to pay, pari passu and pro rata according to the respective interest amounts thereof any Hedging Senior Payment due and payable on such Guarantor Payment Date, under (a) the Portfolio Swaps, and (b) the OBG Swap; (iv) fourth, to replenish the Reserve Account up to the Total Target Reserve Amount; (v) fifth, to pay, pari passu and pro rata according to the respective amounts thereof any amount necessary to cover the amounts transferred from the Pre-Issuer Event of Default Principal Priority according to item (i) on any preceding Guarantor Payment Date and not paid yet; (vi) sixth, provided that a Programme Suspension Period is not continuing, to pay, pari passu and pro rata according to the respective amounts thereof any termination payment due and payable event under any hedging agreement other than the ones paid under item (iii) above provided that the Over- Collateralisation Test and the Mandatory Tests would still be satisfied after such payment; (vii) seventh, provided that a Programme Suspension Period is not continuing, to pay, pari passu and pro rata according to the respective amounts thereof, all 75

76 amounts due and payable to the Seller or the Additional Seller (if any) (as the case may be), in accordance with the relevant transfer agreement provided that the Over-Collateralisation Test and the Mandatory Tests would still be satisfied after such payment; (viii) eight, provided that a Programme Suspension Period is not continuing, to pay, pari passu and pro rata according to the respective amounts thereof, any and all outstanding fees, costs, liabilities and any other expenses to be paid to fulfil obligations to any other creditors and Secured Creditors of the OBG Guarantor incurred in the course of the OBG Guarantor s business in relation to this Programme (other than amounts already provided for in this Priority of Payments) provided that the Over- Collateralisation Test and the Mandatory Tests would still be satisfied after such payment; (ix) ninth, provided that a Programme Suspension Period is not continuing and after the repayment request made by the Subordinated Loan Provider under the Subordinated Loan (or additional subordinated loan provider, if any, under any additional subordinated loan), to pay pari passu and pro rata according to the respective amounts thereof, any principal amount due and payable as determined by the Subordinated Loan Provider (or additional subordinated loan provider, if any) under the Subordinated Loan (or the relevant additional subordinated loan, if any) provided that the Over-Collateralisation Test and the Mandatory Tests would still be satisfied after such payment; (x) tenth, provided that a Programme Suspension Period is not continuing, to pay, pari passu and pro rata, according to the respective amounts thereof, any Loan Interest Amount (as defined below) due and payable under the Subordinated Loan (or additional subordinated loan, if any) provided that the Over- Collateralisation Test and the Mandatory Tests would still be satisfied after such payment, (the Pre-Issuer Event of Default Interest Priority ). Target Expenses Amount means at each Guarantor Payment Date the amount of Euro 50,

77 Pre-Issuer Event of Default Principal Priority Hedging Senior Payment means, on any relevant date, any payment due under the relevant Hedging Agreement, including any termination payment arising out of a termination event, other than termination payments where the relevant Hedging Counterparty is the defaulting party or the sole affected party, but including, in any event, the amount of any termination payment due and payable to the relevant Hedging Counterparty in relation to the termination of the relevant swap transactions to the extent of any premium received (net of any costs reasonably incurred by the OBG Guarantor to find a replacement swap counterparty), if any, by the OBG Guarantor from a replacement swap counterparty in consideration for entering into swap transactions with the OBG Guarantor on the same terms as the relevant Hedging Agreement. With respect to the Additional Provisions Mark to Market Payment in the Portfolio Front Swap, termination payment under this clause will be part of the Hedging Senior Payments for an amount up to the difference on each Guarantor Payment Date between the purchase price paid by any purchaser/s of the Selected Asset and the Principal Amount Outstanding of the Asset and Integrative Asset sold to such purchaser/s. Total Target Reserve Amount means, on each Guarantor Payment Date, prior to the occurrence of an Issuer Event of Default and the delivery of a Notice to Pay, the difference, if positive, between (i) the amount of interest accrued on the OBG until that Guarantor Payment Date (inclusive) and not yet paid by the Issuer or the OBG Guarantor and (ii) the amount accrued until that Guarantor Payment Date (inclusive) with respect to any payment to be done by the OBG Hedging Counterparty on the subsequent OBG Payment Date. On each Guarantor Payment Date, prior to the service of a Notice to Pay, the OBG Guarantor will use Principal Available Funds (as defined below) to make payments in the order of priority set out below (in each case only if and to the extent that payments of a higher priority have been made in full): (i) first, to pay, pari passu and pro rata according to the respective amounts thereof, any amount due and payable under items (i) to (iii) (other than any 77

78 amount due according to (i) b)) of the Pre-Issuer Event of Default Interest Priority, to the extent that the Interest Available Funds are not sufficient, on such Guarantor Payment Date, to make such payments in full; (ii) second, to pay, pari passu and pro rata according to the respective amounts thereof any Hedging Senior Payment amount due and payable on such Guarantor Payment Date in respect of principal under any hedging agreement (including the Swap Agreements); (iii) third, provided that a Programme Suspension Period is not continuing, to pay, pari passu and pro rata according to the respective amounts thereof, the purchase price of the Assets and Integration Assets offered for sale by the Seller and/or by the Additional Seller (if any) in the context of a Revolving Assignment; (iv) fourth, if a Programme Suspension Period has occurred and is continuing, to deposit on the Principal Collection Account any residual Principal Available Funds up to the Required Redemption Amount of any Series of OBG outstanding and to comply with the Over- Collateralisation Test and Mandatory Test; (v) fifth, provided that a Programme Suspension Period is not continuing, to pay, pari passu and pro rata according to the respective amounts thereof any principal amount arising out of any termination event under any Hedging Agreement other than the ones paid under item (ii) above provided that the Over-Collateralisation Test and the Mandatory Tests would still be satisfied after such payment; (vi) sixth, provided that a Programme Suspension Period is not continuing, to pay, pari passu and pro rata according to the respective amounts thereof, all amounts due and payable to the Seller or the Additional Seller (if any) (as the case may be), in accordance with the relevant transfer agreement provided that the Over-Collateralisation Test and the Mandatory Tests would still be satisfied after such payment, to the extent not already paid under item (vii) of the Pre-Issuer Event of Default Priority; 78

79 (vii) seventh, provided that a Programme Suspension Period is not continuing, to pay, pari passu and pro rata according to the respective amounts thereof, any and all outstanding fees, costs, liabilities and any other expenses to be paid to fulfil obligations to any other creditors and Secured Creditors of the OBG Guarantor incurred in the course of the OBG Guarantor s business in relation to this Programme (other than amounts already provided for in this Priority of Payments) provided that the Over- Collateralisation Test and the Mandatory Tests would still be satisfied after such payment, to the extent not already paid under item (viii) of the Pre-Issuer Event of Default Priority; (viii) eight, provided that a Programme Suspension Period is not continuing, to pay, pari passu and pro rata according to the respective amounts thereof and after the repayment request made by the Subordinated Loan Provider (or additional subordinated loan provider, if any) under the Subordinated Loan (or additional subordinated loan, if any), the amount due as principal redemption under the Subordinated Loan (or additional subordinated loan, if any) provided that the Over- Collateralisation Test and the Mandatory Tests would still be satisfied after such payment, (the Pre-Issuer Event of Default Principal Priority ). On each Guarantor Payment Date the Interest Available Funds shall include (a) any interest received from the Portfolio during the Collection Period immediately preceding such Guarantor Payment Date, (b) any interest amount received by the OBG Guarantor as remuneration of the Accounts during the Collection Period immediately preceding such Guarantor Payment Date, (c) any amount received by the OBG Guarantor on the Guarantor Payment Date as payments under the Portfolio Swaps or the OBG Swaps with respect to the immediately preceding Collection Period, (d) any amount received as interest by the OBG Guarantor from any party to the Transaction Documents (other than amounts already allocated under items (a) and (b)) during the Collection Period immediately preceding such Guarantor Payment Date, (e) any amount deposited 79

80 in the Reserve Account (other than the amount already allocated under item (b)), (f) any amount deposited in the Interest Collection Account, as at the preceding Guarantor Payment Date, (g) the amount standing to the credit of the Expenses Account (other than amounts already allocated under item (b)) at the end of the Collection Period preceding such Guarantor Payment Date (other than the Programme Termination Date), (h) any net interest amount or income from any Eligible Investments or of the Securities (without duplication with the Eligible Investments) liquidated at the immediately preceding Liquidation Date. On each Guarantor Payment Date the Principal Available Funds shall include: (a) any principal payment received during the Collection Period immediately preceding such Guarantor Payment Date; (b) any principal amount received by the OBG Guarantor as reimbursement of the Eligible Investments liquidated on the immediately preceding Liquidation Date arising from investement made using principal collection; (c) any principal amount received by the OBG Guarantor from any party to the Transaction Documents (other than the amounts already allocated under items (a) and (b)) during the Collection Period immediately preceding such Guarantor Payment Date; (d) any amount standing to the credit of the Principal Collection Account (other than the amounts already allocated under item (a)) at the end of the Collection Period preceding such Guarantor Payment Date net of any interest accrued thereon; (e) the amount standing to the credit of the Expenses Account on the Programme Termination Date (f) any principal amount arising out from the liquidation of Securities (without duplication with the (b) above) liquidated at the immediately preceding Liquidation Date arising from investement made using principal collection. Collection Period means (a) prior to the occurrence of a Guarantor Event of Default, any period between each Collection Date (included) and the following Collection Date (excluded), save for the first Collection Period, where the Collection Period is comprised between the Evaluation Date (included) in respect to the transfer of the Initial Portfolio and the 1 January 2009 (excluded) and (b) after the occurrence of a Guarantor Event of 80

81 Post-Issuer Event of Default Priority Default, any period between two Business Days. Collection Date means 1 January, 1 April, 1 July and 1 October of each year and, following an Issuer Event of Default, the first calendar day of each month. Evaluation Date means (i) in respect of the Initial Portfolio 1 August 2008 at and (ii) in respect of any New Portfolio, the date indicated as such in the relevant offer for the transfer of New Portfolios. On each Guarantor Payment Date, following an Issuer Event of Default and the service of a Notice to Pay, but prior to the occurrence of a Guarantor Event of Default, the OBG Guarantor will use the Available Funds, to make payments in the order of priority set out below (in each case only if and to the extent that payments of a higher priority have been made in full): (i) first, to pay, pari passu and pro rata according to the respective amounts thereof (a) the Expenses, to the extent that such costs and expenses have not been already met by utilising the amount standing to the credit of the Expenses Account, (b) all amounts due and payable to the Seller and/or by the Additional Seller (if any) or the party indicated by the Seller or the Additional Seller (if any) as the case may be, in respect of the insurance premium element of the instalment (if any) collected by the OBG Guarantor during the preceding Collection Period with respect to the outstanding Asset still owned by the OBG Guarantor; (ii) second, to pay, pari passu and pro rata according to the respective amounts thereof any amount due and payable (including fees, costs and expenses) to the Representative of the OBG Holders, the Account Bank, the Cash Manager, the Calculation Agent, the Paying Agent, the Luxembourg Listing Agent, the Administrative Services Provider, the Asset Monitor, the Portfolio Manager, the Servicer and the Additional Servicer (if any), and to credit the Target Expenses Amount into the Expenses Account; (iii) third, to pay, pari passu and pro rata according to the respective interest amounts thereof any Hedging Senior Payment due and payable on such Guarantor Payment Date under (a) the Portfolio Swaps and (b) the OBG Swaps and (c) as interest on 81

82 the OBG; (iv) fourth, to pay, pari passu and pro rata according to the respective amounts thereof, (a) any amount due and payable as principal on the OBG on their relevant Payment Dates and (b) any principal amounts due and payable as Hedging Senior Payments on such Guarantor Payment Date in respect any hedging agreement (including the Swap Agreements); (v) fifth, to deposit on the relevant OBG Guarantor s Accounts any residual amount until the Required Redemption Amount for each Series of OBG outstanding has been accumulated and the Amortisation Test and the Mandatory Test would still be satisfied after such payment; (vi) sixth, to pay, pari passu and pro rata according to the respective amounts thereof, any amount arising out of any termination event under any hedging agreement (including the Swap Agreements) not provided for under item (iii) above, provided that the Amortisation Test and the Mandatory Tests would still be satisfied after such payment; (vii) seventh, to pay, pari passu and pro rata according to the respective amounts thereof, all amounts due and payable to the Seller or the Additional Seller (if any) (as the case may be), in accordance with the relevant transfer agreement provided that the Amortisation Test and the Mandatory Tests would still be satisfied after such payment; (viii) eight, to pay, pari passu and pro rata according to the respective amounts thereof, any and all outstanding fees, costs, liabilities and any other expenses to be paid to fulfil obligations to any other creditors and Secured Creditors of the OBG Guarantor incurred in the course of the OBG Guarantor s business in relation to this Programme (other than amounts already provided for in this Priority of Payments) provided that the Amortisation Test and the Mandatory Tests would still be satisfied after such payment; (ix) ninth, after the repayment request made by the Subordinated Loan Provider under the Subordinated Loan, to pay pari passu and pro rata according to the 82

83 respective amounts thereof, any principal amount due and payable as determined by the Subordinated Loan Provider under the Subordinated Loan provided that the Amortisation Test and the Mandatory Tests would still be satisfied after such payment; (x) tenth, to pay, pari passu and pro rata according to the respective amounts thereof, any interest amount due under the Subordinated Loan (or additional subordinated loan, if any), provided that the Amortisation Test and the Mandatory Tests would still be satisfied after such payment; (xi) eleventh, after the repayment request made by the Subordinated Loan Provider (or additional subordinated loan provider, if any) under the Subordinated Loan (or additional subordinated loan, if any), to pay, pari passu and pro rata according to the respective amounts thereof, any principal amount due under the Subordinated Loan (or additional subordinated loan, if any) provided that the Amortisation Test and the Mandatory Tests would still be satisfied after such payment, (the Post-Issuer Event of Default Priority ). Available Funds shall include (a) the Interest Available Funds, (b) the Principal Available Funds and (c) following the occurrence of an Issuer Event of Default, the Excess Proceeds. Excess Proceeds means the amounts received by the OBG Guarantor as a result of any enforcement taken against the Issuer in accordance with Article 4, Para. 3 of the MEF Decree. Negative Carry Corrector means a percentage calculated by reference to margin payable on the OBG plus 0,5 per cent. Required Redemption Amount means in respect of any relevant Series or Tranche OBG, the amount calculated as follows: the Outstanding Principal Balance of the relevant Series or Tranche of OBG multiplied (1 + (Negative Carry Corrector * (days to the Maturity Date (or the Extended Maturity Date if applicable) of the 83

84 Post-Guarantor Event of Default Priority OBG/365)) plus and any pro rata cost expected to be incurred by the OBG Guarantor up to the last Maturity Date (or the Extended Maturity Date if applicable) with respect to that OBG. On each Guarantor Payment Date, following a Guarantor Event of Default, the OBG Guarantor will use the Available Funds, to make payments in the order of priority set out below (in each case only if and to the extent that payments of a higher priority have been made in full): (i) first, to pay, pari passu and pro rata according to the respective amounts thereof (a) any Expenses, to the extent that such costs and expenses have not been already met by utilising the amount standing to the credit of the Expenses Account, and (b) all amounts due and payable to the Seller and/or to the Additional Seller (if any) or the party indicated by the Seller or by the Additional Seller (if any) as the case may be, in respect of the insurance premium element of the instalment (if any) collected by the OBG Guarantor during the preceding Collection Period with respect to the outstanding Asset; (ii) second, to pay, pari passu and pro rata according to the respective amounts thereof any amount due and payable (including fees, costs and expenses) to the Representative of the OBG Holders, the Account Bank, the Cash Manager, the Calculation Agent, the Paying Agent, the Luxembourg Listing Agent, the Administrative Services Provider, the Asset Monitor, the Portfolio Manager, the Servicer and the Additional Servicer (if any) and to credit the Target Expenses Amount into the Expenses Account; (iii) third, to pay, pari passu and pro rata (a) according to the respective interest amounts thereof any Hedging Senior Payment due and payable on such Guarantor Payment Date under (A) the Portfolio Swaps and (B) the OBG Swaps (b) any interest and principal amount due on the OBG; and (c) any principal amount due and payable under any hedging agreement (including the Swap Agreements); (iv) fourth, to pay, pari passu and pro rata according to the respective amounts thereof, any amount arising 84

85 out of any termination event under any hedging agreement (including the Swap Agreements) not provided for under item (iii) above; (v) fifth, to pay, pari passu and pro rata according to the respective amounts thereof, all amounts due and payable to the Seller or the Additional Seller (if any) (as the case may be), in accordance with the relevant transfer agreement; (vi) sixth, to pay, pari passu and pro rata according to the respective amounts thereof, any and all outstanding fees, costs, liabilities and any other expenses to be paid to fulfil obligations to any other creditors and Secured Creditors of the OBG Guarantor incurred in the course of the OBG Guarantor s business in relation to this Programme (other than amounts already provided for in this Priority of Payments); (vii) seventh, after the repayment request made by the Subordinated Loan Provider (or additional subordinated loan provider, if any) under the Subordinated Loan Agreement (or additional subordinated loan agreement), to pay pari passu and pro rata according to the respective amounts thereof, any principal amount due and payable as determined by the Subordinated Loan Provider (or additional subordinated loan provider, if any) under the Subordinated Loan (or additional subordinated loan, if any); (viii) eight, to pay, pari passu and pro rata according to the respective amounts thereof, any interest amount due under the Subordinated Loan (or additional subordinated loan, if any); (ix) ninth, to pay, pari passu and pro rata according to the respective amounts thereof, any principal amount due under the Subordinated Loan (or additional subordinated loan, if any), (the Post-Guarantor Event of Default Priority and, together with the Pre-Issuer Event of Default Principal Priority, the Pre-Issuer Event of Default Interest Priority, the Post-Issuer Event of Default Priority, are collectively referred to as the Priorities of Payment ). 85

86 4 Creation and administration of the Portfolio Transfer of the Portfolio Pursuant to the Master Transfer Agreement, the Seller (a) transferred to the OBG Guarantor the Initial Portfolio and (b) may assign and transfer Assets and/or Integration Assets satisfying the Criteria to the OBG Guarantor from time to time, on a revolving basis, in the cases and subject to the limits for the transfer of further Assets referred to below. The Initial Purchase Price has been determined pursuant to the Master Transfer Agreement. Under the Master Transfer Agreement the relevant parties thereto have acknowledged that the Initial Purchase Price shall be funded through the proceeds granted in accordance with the Subordinated Loan Agreement. Pursuant to the Master Transfer Agreement, the OBG Guarantor shall acquire, further Assets or Integration Assets, as the case may be, in order to: (a) collateralise and allow the issue of further series of OBG by the Issuer, subject to the Limits to the Assignment (the Issuance Collateralisation Assignment ); and/or (b) invest the Principal Available Funds through the purchase of further Assets or Integration Assets, provided that a Programme Suspension Period is not continuing (the Revolving Assignment ); and/or (c) comply with the Over-Collateralisation Test and the Mandatory Tests in accordance with the Portfolio Administration Agreement (the Integration Assignment ), subject to the limits referred to in sub-section Integration Assets below. The Assets and the Integration Assets will be assigned and transferred to the OBG Guarantor without recourse (pro soluto) in accordance with Law 130 and subject to the terms and conditions of the Master Transfer Agreement. On 29 May 2009, the Seller and the OBG Guarantor have entered into a sale agreement pursuant to which the OBG Guarantor has purchased, in accordance with the Master Transfer Agreement, the May 2009 New Portfolio. The assignment of the May 2009 New Portfolio constitutes an Issuance Collateralisation Assignment. The purchase price of the May 2009 New Portfolio has been determined 86

87 Representations and Warranties of the Seller in accordance with the provisions of the Master Transfer Agreement. The payment of the purchase price of the May 2009 New Portfolio to the Seller has been financed through the amounts drawn-down under the Subordinated Loan. On 13 November 2009, the Seller and the OBG Guarantor have entered into a sale agreement pursuant to which the OBG Guarantor has purchased, in accordance with the Master Transfer Agreement, the November 2009 New Portfolio. The assignment of the November 2009 New Portfolio constitutes a Revolving Assignment. The purchase price of the November 2009 New Portfolio has been determined in accordance with the provisions of the Master Transfer Agreement. The payment of the purchase price of the November 2009 New Portfolio to the Seller has been financed through the Principal Available Funds available for such purposes in accordance with the applicable Priorities of Payment. On 21 May 2010, the Seller and the OBG Guarantor have entered into a sale agreement pursuant to which the OBG Guarantor has purchased, in accordance with the Master Transfer Agreement, the May 2010 New Portfolio. The assignment of the May 2010 New Portfolio constitutes a Revolving Assignment. The purchase price of the May 2010 New Portfolio has been determined in accordance with the provisions of the Master Transfer Agreement. The payment of the purchase price of the May 2010 New Portfolio to the Seller has been financed through the Principal Available Funds available for such purposes in accordance with the applicable Priorities of Payment. Pursuant to the Master Transfer Agreement, and subject to the conditions provided therein, the Seller has been granted with a call option and pre-emption right to repurchase Assets which have been assigned to the OBG Guarantor of the Assets forming part of the Portfolio. Furthermore, the Seller has been granted by the OBG Guarantor with a wide power to renegotiate the terms and conditions of the Assets transferred pursuant to the Master Transfer Agreement. Under the Warranty and Indemnity Agreement, the Seller has made certain representations and warranties regarding itself and the Assets including, inter alia: (i) its status, capacity and authority to enter into 87

88 General Criteria the Transaction Documents and assume the obligations expressed to be assumed by it therein; (ii) the legality, validity, binding nature and enforceability of the obligations assumed by it; (iii) the existence of the Assets, the absence of any lien attaching the Assets; subject to the applicable provisions of laws and of the relevant agreements, the full, unconditional, legal title of the Seller to the Initial Portfolio; and (iv) the validity and enforceability, subject to the applicable provisions of laws and of the relevant agreements, against the relevant Debtors of the obligations from which the Initial Portfolio arises. Each of the Mortgage Receivables comprised in the Portfolio shall comply with the following general criteria (the General Criteria ) as at the relevant Evaluation Date (to be deemed cumulative unless otherwise provided) (or at such other date specified below): (i) mortgage loans in respect of which the ratio between loan s outstanding principal on the Evaluation Date and the value of the real estate upon which the guarantee has been created, calculated on the Execution Date or on the date of the apportionment (frazionamento) in case of loans arising from the apportionment (frazionamento) of a prior quota loan, is: (a) equal to or lower than 80 per cent. in case of residential mortgage loans, or (b) equal to or lower than 60 per cent. in case of commercial mortgage loans; (ii) loans in respect of which the principal debtors (including further to a novation (accollo liberatorio) and/or apportionment (frazionamento)) are: (c) in case of residential mortgage loans, one or more individuals, of which at least one having his residence in Italy; or (d) in case of commercial mortgage loans, one or more entities, of which at least one having its registered office in Italy; (iii) loans which have been fully disbursed, 88

89 including also those disbursed in more than one disbursement, and not fully redeemed on the date of Evaluation Date (included) or the loans arising from the quota apportionment (frazionamento) of a prior loan, in respect of which no obligation or possibility to carry out further disbursement subsist; (iv) loans secured by a mortgage on real estates located in Italy in respect of which the hardening period (periodo di consolidamento) applicable to the relevant mortgage is elapsed on the Evaluation Date o prior to it; (v) loans in respect of which at least one instalment is fallen due and paid, including in case of interest instalment; (vi) loans which are governed by Italian law; (vii) loans denominated in Euro (or originally disbursed in a different currency and subsequently redenominated in Euro). The Portfolio does not include Mortgage Receivables arising from: (viii) loans granted to a public administration entity (ente pubblico) (ix) loans granted to an ecclesiastic entity (ente ecclesiastico); (x) loans which were classified as agricultural credit (mutui agrari) pursuant to article 43 of the Banking Act, as at the relevant Execution date; (xi) loans advanced, under any applicable law (including regional and/or provincial) or regulation in force in the Republic of Italy providing for financial support (mutui agevolati and convenzionati) of any kind with regard to principal and/or interest to the relevant borrower; (xii) loans that, although performing (in bonis), have been restructured after the relevant execution date; (xiii) loans disbursed in whole or in part using third parties funds (including, as the case may be, funds granted by enti agevolanti). The Mortgage Receivables to be comprised in the Portfolio shall comply also with the Specific Criteria in addition to the General Portfolio. Execution Date means the date on which the relevant 89

90 Eligible Investments loan agreement has been executed, without taking into account potential accolli or restructuring or frazionamenti that have been executed after such date. Specific Criteria means the criteria for the selection of the the Mortgage Receivables to be included in the portfolios to which such criteria are applied, as set forth in annex 2 to the Master Transfer Agreement for the Initial Portfolio and in the relevant transfer agreement for sale of each further portfolio of Mortgage Receivables. Criteria means jointly the General Criteria and the Specific Criteria. The Cash Manager shall invest funds standing to the credit of the Eligible Investment Account in Euro denominated Integration Assets and other instruments meeting the requirements set out under the laws and regulations applicable from time to time to the OBG and the following requirements. In case investments are purchased with amounts deposited in the Principal Collection Account, such investments shall have a minimum rating equal to the ones reported on the following table, a remaining maturity date (where applicable) equal to the earlier of (i) the maturity reported in the table and (ii) the Liquidation Date immediately preceding the OBG Payment Date of the Earliest Maturing Series or Tranche of OBG. In case investments are purchased with amounts deposited in the Accounts (other than the Principal Collection Account) such investments shall have a remaining maturity date (where applicable) equal to the earlier (i) of the ones reported in the table and (ii) the Liquidation Date immediately preceding the next Guarantor Payment Date. Maturity S&P Rating Moody s Fitch Less than 365 calendar days A-1+/AA P-1 F1+/AA- More than 60 calendar days provided that the Substitution Mechanism is in A-1/A+ P1 F1+/AAplace Less than 60 calendar days A-1/A+ P-1 F1+/AA- Less than 30 calendar days A-1/A+ P-1 F1/A where Substitution Mechanism means that the investments should be liquidated within 60 days of a 90

91 Integration Assets Mandatory Tests under the MEF Decree downgrade below 'A-1' (or 'A+' if no short-term rating), at no loss to the OBG Guarantor. The investments indicated above are referred to as Eligible Investments. In accordance with the provisions of the MEF Decree and the BoI OBG Regulations, Integration Assets shall include: (i) deposits with banks which qualify as Eligible Institutions residing in Eligible States; (ii) securities issued by Eligible Institutions residing in Eligible States with residual maturity not longer than one year. The integration of the Portfolio through Integration Assets shall be allowed within 15% of the aggregate Outstanding Principal Balance of the Eligible Portfolio (in accordance with section II, para. 3, of the BoI OBG Regulations) (such limit, the Limit to the Integration ). The integration of the Portfolio (whether through Integration Assets or through Assets) shall be allowed exclusively for the purpose of complying with the Mandatory Tests and the Over- Collateralisation Test or for the purpose of complying with the Limit to the Integration. Eligible Institutions means any banks in relation to which the short term unsecured, unsubordinated and unguaranteed debt obligations are rated at least A-1 by S&P, P-1 by Moody s, F1 by Fitch in respect of shortterm debt and A by Fitch in respect of long-term debt or are guaranteed (on the basis of a guarantee satisfying Rating Agencies criteria) by an entity in relation to which the short term unsecured, unsubordinated and unguaranteed debt obligations are rated at least A-1 by S&P, P-1 by Moody s, F1 by Fitch in respect of shortterm debt and A by Fitch in respect of long-term debt. Eligible States shall mean any States belonging to the European Economic Space, Switzerland and any other state attracting a 0% risk weight factor under the standard approach provided for by the Basel II rules. In accordance with the provisions of the MEF Decree, for so long as the OBG remain outstanding, the Issuer (also in its capacity as Seller) shall procure on a continuing basis and on each Calculation Date that: 91

92 Over-Collateralisation Test (i) the Outstanding Principal Balance of the Eligible Portfolio (net of any amount standing to the credit of the Accounts other than the Principal Collection Account) from time to time owned by the OBG Guarantor shall be higher than or equal to the Outstanding Principal Balance of the OBG at the same time outstanding; (ii) the Adjusted Net Present Value of the Eligible Portfolio shall be higher than or equal to the Present Value of the outstanding OBG; (iii) the Net Interest Collections from the Eligible Portfolio shall be higher than or equal to the Scheduled Interests, the tests above are jointly referred to as the Mandatory Tests. The compliance with the Mandatory Tests will be verified by (i) the Calculation Agent and subsequently checked by the Asset Monitor pursuant to the Asset Monitor Agreement; and (ii) the internal risk management functions of the Uni Credit Banking Group (under the supervision of the management body of the Issuer). In addition to the above, following the occurrence of a breach of the Mandatory Tests, the Calculation Agent shall verify compliance with the Mandatory Tests not later than 4 Business Days before the end of each calendar month starting from the date on which such breach has occurred and until the date on which such breach has been cured. For a detailed description of the Mandatary Tests (including a description of the defined terms used herein) see Credit Structure - Mandatory Tests below. For so long as the OBG remain outstanding, the Issuer (also in its capacity as Seller), the Additional Sellers (if any) shall procure on a continuing basis and on each OC Calculation Date that the OC Adjusted Eligible Portfolio shall be equal to or higher than the Outstanding Principal Balance of the OBG. OC Calculation Date means 4 Business Days before the end of each calendar month, on which the Over- Collateralisation Test is performed with reference to the situation existing on, and on the data as of, the preceding Reconciliation Date. Reconciliation Date means the last Business Day of 92

93 Breach of the Mandatory Tests or of the Over-Collateralisation Test Role of the Asset Monitor Sale of Assets following the occurrence of an Issuer Event of Default each month. A breach of the Over-Collateralisation Test or of the Mandatory Tests shall constitute an Issuer Event of Default to the extent that such breach has not been cured within one month from the delivery of a Negative Report as confirmed by the Asset Monitor Report (the OC Cure Period ). In order to cure the breach of the Mandatory Tests and/or the Over-Collateralisation Test, the Issuer (also in its capacity as Seller) and the Additional Sellers (if any) (a) shall sell or procure a third party to sell Assets or Integration Assets to the OBG Guarantor in accordance with the Master Transfer Agreement and the Portfolio Administration Agreement in an aggregate amount sufficient to ensure that the Over-Collateralisation Test is met as soon as practicable and in any event within the OC Cure Period and, to this extent, (b) shall grant the funds necessary for payment of the purchase price of the assets mentioned above to the OBG Guarantor in accordance with the Subordinated Loan Agreement (or, in the case of the Additional Seller pursuant to the terms of a subordinated loan granted to the OBG Guarantor in accordance with the Portfolio Administration Agreement). The Asset Monitor will, subject to receipt of the relevant information from the Calculation Agent, test the calculations performed by the Calculation Agent in respect of the Over-Collateralisation Test, the Mandatory Tests on a monthly basis and more frequently under certain circumstances. The Asset Monitor will also perform the other activities provided under the Asset Monitor Agreement. See Description of the Transaction Documents - Description of the Asset Monitor Agreement below. Following the delivery of a Notice to Pay (and prior to the occurrence of a Guarantor Event of Default), the OBG Guarantor shall direct the Servicer to sell all or part of the Selected Assets comprised in the Portfolio in accordance with the provisions of the Portfolio Administration Agreement, subject to any pre-emption right of the Seller and any Additional Seller (if any) pursuant to the Master Transfer Agreement or any other Transaction Documents. The proceeds of any such sale 93

94 5 Summary of the Transaction Documents shall be credited to the Principal Collection Account and invested in accordance with the terms of the Cash Management and Agency Agreement. Master Transfer Agreement Warranty and Indemnity Agreement Subordinated Loan Agreement Pursuant to the Master Transfer Agreement, the Seller (a) transferred to the OBG Guarantor, without recourse (pro soluto) and in accordance with Law 130, the Initial Portfolio and (b) agreed the terms upon which it may assign and transfer Assets and/or Integration Assets satisfying the Criteria to the OBG Guarantor from time to time, on a revolving basis, in the cases and subject to the limits for the transfer of further Assets described above. See Description of the Transaction Documents - Description of the Master Transfer Agreement below. On 29 August 2008, the Seller and the OBG Guarantor entered into a warranty and indemnity agreement (the Warranty and Indemnity Agreement ), pursuant to which, the Seller made certain representations and warranties in favour of the OBG Guarantor. See Description of the Transaction Documents - Description of the Warranty and Indemnity Agreement below. On 14 October 2008, the Seller and the OBG Guarantor entered into a subordinated loan agreement (the Subordinated Loan Agreement ), pursuant to which the Subordinated Loan Provider granted to the OBG Guarantor a subordinated loan (the Subordinated Loan ) with a maximum amount equal to Euro 7,500,000,000, save for further increases to be determined by the Subordinated Loan Provider. Following the determination to that effect by the Seller, the maximum amount of the Subordinated Loan has been increased in connection with the purchase of the May 2009 Portfolio and is currently equal to 17,500,000,000. Under the provisions of such agreement, the Seller shall make advances to the OBG Guarantor in amounts equal to the relevant price of the Portfolios transferred from time to time to the OBG Guarantor, including the Integration Assets transferred in order to prevent a breach of the Over-Collateralisation Test or/and of the Mandatory Tests. The interest payble on the Subordinated Loan shall be an amount equal to the algebraic sum of: 94

95 OBG Guarantee Servicing Agreement and Collection Policies Administrative Services Agreement Intercreditor Agreement (i) (+) the amount of interest accrued on the Portfolio during the relevant Interest Period of the Subordinated Loan; (ii) (-) (a) the sum of any amount paid under items from (i) to (ix) of the Pre-Issuer Event of Default Interest Priority or (b) following the occurrence of an Issuer Event of Default and the service of a Notice to Pay, the sum of any amount paid under items from (i) to (ix) of the Post- Issuer Event of Default Interest Priority or (c) following the occurrence of a Guarantor Event of Default, the sum of any amount paid under items from (i) to (v) of the Post-Guarantor Event of Default Priority, such amount is referred to as the Subordinated Loan Interest Amount. See Description of the Transaction Documents - Description of the Subordinated Loan below. On 14 October 2008 the OBG Guarantor issued a guarantee securing the payment obligations of the Issuer under the OBG (the OBG Guarantee ), in accordance with the provisions of Law 130 and of the MEF Decree. See General Description of the Programme - OBG Guarantee and Description of the Transaction Documents - Description of the OBG Guarantee below. Pursuant to the terms of the Servicing Agreement, the Servicer has agreed to administer and service the Portfolio, on behalf of the OBG Guarantor. For a description of the collection policies and procedures please see Description of the Transaction Documents - Description of the Servicing Agreement and Credit and Policies below. Pursuant to the terms of the Administrative Services Agreement, the Administrative Services Provider has agreed to provide the OBG Guarantor with a number of administrative services, including the keeping of the corporate books and of the accounting and tax registers. See Description of the Transaction Documents - Description of the Administrative Services Agreement below. Pursuant to the terms of an intercreditor agreement entered into on 14 October 2008, as subsequently amended, (the Intercreditor Agreement ) between 95

96 Cash Management and Agency Agreement and Calculation Agency Agreement the OBG Guarantor, the Representative of the OBG Holders (in its own capacity and as legal representative of the Organisation of the OBG Holders), the Issuer, the Seller, the Subordinated Loan Provider, the Servicer, the Administrative Services Provider, the Account Bank, the Paying Agent, the Hedging Counterparties, the Cash Manager, the Asset Monitor, the Portfolio Manager and the Calculation Agent (collectively, with the exception of the OBG Guarantor, the Secured Creditors ), the parties thereto agreed that all the Available Funds of the OBG Guarantor will be applied in or towards satisfaction of the OBG Guarantor s payment obligations towards the OBG Holders as well as the Secured Creditors, in accordance with the relevant Priority of Payments provided in the Intercreditor Agreement. According to the Intercreditor Agreement, the Representative of the OBG Holders will, subject to a Guarantor Event of Default having occurred and a Guarantor Acceleration Notice having been served on the OBG Guarantor, ensure that all the Available Funds are applied in or towards satisfaction of the OBG Guarantee s payment obligations towards the OBG Holders as well as the Secured Creditors, in accordance with the Post- Guarantor Event of Default Priority provided in the Intercreditor Agreement. The obligations owed by the OBG Guarantor to each of the OBG Holders and each of the Secured Creditors will be limited recourse obligations of the OBG Guarantor limited to the Available Funds. The OBG Holders and the Secured Creditors will have a claim against the OBG Guarantor only to the extent of the Available Funds, in each case subject to and as provided for in the Intercreditor Agreement and the other Transaction Documents. See Description of the Transaction Documents - Description of the Intercreditor Agreement below. Pursuant to the terms of a cash management and agency agreement entered into on 14 October 2008, as subsequently amended, between the OBG Guarantor, the Issuer, the Cash Manager, the Account Bank, the Paying Agent, the Servicer, the Administrative Services Provider, the Calculation Agent and the Representative of the OBG Holders (the Cash Management and Agency 96

97 Agreement ), the Account Bank, the Paying Agent, the Servicer, the Administrative Services Provider and the Calculation Agent will provide the OBG Guarantor with certain calculation, notification and reporting services together with account handling and cash management services in relation to moneys from time to time standing to the credit of the Accounts. Pursuant to the terms of the Cash Management and Agency Agreement, the OBG Guarantor has appointed, in accordance with a calculation agency agreement entered into on 14 May 2009 (the Calculation Agency Agreement ), the Additional Calculation Agent for the purposes of carrying out certain calculation, notification and reporting services. The Additional Calculation Agent will carry out its services under the supervision of the Calculation Agent which will assume responsibility for the activities delegated to the Additional Calculation Agent. Pursuant to the terms of the Calculation Agency Agreement, the commissions and fees of the Additional Calculation Agent shall be payable according to item (ii) of the Pre-Issuer Event of Default Interest Priority or item (ii) of the Post-Issuer Event of Default Priority or item (ii) of the Post-Guarantor Event of Default Priority, as the case may be, in each case pro rata with the amounts payable to the Calculation Agent. Pursuant to Calculation Agency Agreement, the obligations owed by the OBG Guarantor to the Additional Calculation Agent will be limited recourse obligations of the OBG Guarantor limited to the Available Funds. The Additional Calculation Agent will have a claim against the OBG Guarantor only to the extent of the Available Funds, in each case subject to and as provided for in the Calculation Agency Agreement and the other Transaction Documents. See Description of the Transaction Documents - Description of the Cash Management and Agency Agreement and of the Calculation Agency Agreement below. On 14 October 2008, BNP Paribas S.A. and the OBG Guarantor entered into a deed of guarantee under which BNP Paribas S.A., as guarantor, guaranteed the obligations of the Paying Agent under the Cash Management and Agency Agreement (including the obligation of the Paying Agent in respect of the 97

98 Asset Monitor Agreement Portfolio Administration Agreement Quotaholders Agreement Deed of Pledge Accounts held with it) in favour of the OBG Guarantor (the Paying Agent Guarantee ). Pursuant to the terms of an asset monitor agreement entered into on 14 October 2008, between the Issuer, the Asset Monitor, the OBG Guarantor and the Representative of the OBG Holders (the Asset Monitor Agreement ), the Asset Monitor will conduct independent tests in respect of the calculations performed for the Over-Collateralisation Test or the Mandatory Tests with a view to verifying the compliance by the OBG Guarantor with such tests. See Description of the Transaction Documents - Description of the Asset Monitor Agreement below. Pursuant to the terms of a portfolio administration agreement entered into on 14 October 2008, as subsequently amended, between the OBG Guarantor, the Issuer, the Seller, the Representative of the OBG Holders, the Calculation Agent, the Cash Manager and the Asset Monitor (the Portfolio Administration Agreement ), the Seller has, inter alia, undertaken to ensure on an on-going basis that the Mandatory Tests and the Over-Collateralisation Test are complied with and has assumed certain obligations to sell further Assets and/or Integration Assets upon the occurrence of certain events. See Description of the Transaction Documents - Description of the Portfolio Administration Agreement below. Pursuant to the terms of a quotaholders agreement entered into on 14 October 2008, between the OBG Guarantor, the Seller, SVM and the Representative of the OBG Holders (the Quotaholders Agreement ), the quotahoders of the OBG Guarantor have assumed certain undertakings in relation to the management of the OBG Guarantor. In addition, pursuant to the Quotaholders Agreement, SVM granted a call option in favour of the Seller to purchase from SVM and the Seller granted a put option in favour of SVM to sell to the Seller the quotas of the OBG Guarantor corporate capital held by SVM. See Description of the Transaction Documents - Description of the Quotaholders Agreement below. Pursuant to the terms of a Italian law deed of pledge entered into on 14 October 2008 between, inter alios, the 98

99 Deed of Charge Dealer Agreement OBG Guarantor and the Representative of the OBG Holders (the Deed of Pledge ) the OBG Guarantor has pledged in favour of the OBG Holders and the other Secured Creditors all the monetary claims and rights and all the amounts payable from time to time (including payment for claims, indemnities, damages, penalties, credits and guarantees) to which the OBG Guarantor is entitled pursuant to or in relation with the Transaction Documents (other than the English Law Documents, the Conditions and the Deed of Pledge), excluding the monetary claims and rights relating to the amounts standing to the credit of the Accounts and any other account established by the OBG Guarantor in accordance with the provisions of the Transaction Documents. See Description of the Transaction Documents - Description of the Deed of Pledge below. Pursuant to the terms of and English law deed of charge entered into between the OBG Guarantor and the Representative of the OBG Holders on 14 October 2008 and the English law deed of charge subsequently executed for the purposes of verification on 28 November 2008 by the OBG Guarantor and the Representative of the OBG Holders (the Deed of Charge ) the OBG Guarantor has assigned by way of security to, and charged in favour of, the Representative of the OBG Holders (acting in its capacity as security trustee for itself and on trust for the OBG Holders and the Secured Creditors; in such capacity the Security Trustee ), all of its rights, title, interest and benefit from time to time in and to the Swap Agreements. See Description of the Transaction Documents - Description of the Deed of Charge below. Pursuant to the terms of a dealer agreement entered into on 14 October 2008 between the Issuer, the Representative of OBG Holders and UniCredit Bank (the Dealer Agreement ), the Issuer has appointed UniCredit Bank as Initial Dealer. The Dealer Agreement will contain, inter alia, provisions for the resignation or termination of appointment of existing Dealer(s) and for the appointment of additional or other dealers either generally in respect of the Programme or in relation to a particular Series. See Description of the Transaction Documents - Description of the Dealer Agreement 99

100 Subscription Agreement Swap Agreements below. The Dealer Agreement also contains a pro forma subscription agreement to be entered into in relation to OBG issued on a syndicated basis. On or prior to the relevant Issue Date, the Issuer, the Dealers who are parties to such subscription agreement (the Relevant Dealers ) and the Representative of the OBG Holders will enter into a subscription agreement (each a Subscription Agreement ), under which the Relevant Dealers will agree to subscribe for the relevant Series or Tranche of OBG, subject to the conditions set out therein. See Description of the Transaction Documents - Description of the Subscription Agreement below. Pursuant to one or more hedging agreements entered to with the relevant Portfolio Hedging Counterparty, the OBG Guarantor will, from time to time, hedge its interest rate risk on the Portfolio (the Portfolio Front Swap Agreements ). Pursuant to one or more hedging agreements with the relevant OBG Hedging Counterparty, the OBG Guarantor will, from time to time, hedge its currency risk and/or interest rate risk on the OBG (the OBG Front Swap Agreements and, together with the Portfolio Front Swap Agreements, the Front Swaps ). On the same date of execution of the Portfolio Front Swaps, the OBG Guarantor will, from time to time, enter into additional hedging agreements with the relevant Mirror Hedging Counterparty in order to neutralise the cash flows to be exchanged under the Portfolio Front Swap Agreements (the Portfolio Mirror Swap Agreements and, together with the Portfolio Front Swap Agreements, the Portfolio Swaps ). The Portfolio Mirror Swap Agreements will be terminated at zero cost for the OBG Guarantor upon occurrence of an Issuer Event of Default. On the same date of execution of the OBG Front Swaps the OBG Guarantor will, from time to time, enter into additional hedging agreements with the relevant Mirror Hedging Counterparty in order to neutralise the cash flows to be exchanged under the OBG Front Swap Agreements (the OBG Mirror Swap Agreements and, 100

101 Provisions of the Transaction Documents together with the OBG Front Swap Agreement, the OBG Swaps ). The OBG Mirror Swap Agreements will be terminated at zero cost for the OBG Guarantor upon occurrence of an Issuer Event of Default. The OBG Mirror Swap Agreements and the Porfolio Mirror Swap Agreements are jointly referred to as the Mirror Swaps ; the Portfolio Swaps and the OBG Swaps are jointly referred to as the Swap Agreements. See Description of the Transaction Documents OBG Swaps and Description of the Transaction Documents Portfolio Swaps below. The OBG Holders are entitled to the benefit of, are bound by, and are deemed to have notice of, all provisions of the Transaction Documents applicable to them. In particular, each OBG Holder, by reason of holding OBG, recognises the Representative of the OBG Holders as its representative and accepts to be bound by the terms of each of the Transaction Documents signed by the Representative of the OBG Holders as if such OBG Holder was a signatory thereto. 101

102 DESCRIPTION OF THE ISSUER Description of UniCredit and the UniCredit Group UniCredit S.p.A. ( UniCredit ), established in Genoa by way of a private deed dated 28 April 1870 with an expiry date of 31 December 2050, is incorporated as a company limited by shares under Italian law and registered in the Rome Trade and Companies Register, having its registered office at Via A. Specchi, 16, 00186, Rome, Italy and having registration number, fiscal code and VAT number UniCredit s head office and principal centre of business is at Piazza Cordusio, 20123, Milan, Italy, telephone number (Investor Relations). The fully issued and paid-up capital of UniCredit as at 31 December 2010 amounted to 9,648,790, The Gruppo Bancario UniCredit registered with the register of banking groups held by the Bank of Italy pursuant to article 64 of the Banking Act under number (the Group or the UniCredit Group or the UniCredit Banking Group ) is a leading global financial institution, with an established presence in 22 countries through local domestic banks and a presence in another 25 international markets via representative offices, branches and specialised banks. In particular, the Group is strategically positioned in its primary markets where it has become a market leader in several geographic areas such as Italy, southern Germany, Austria, Poland and central-eastern Europe, where the Group is a market leader. The Group focuses on full-service financial services and is engaged in a wide range of banking, financial and related activities (including deposit-taking, lending, asset management, securities trading and brokerage, investment banking, international trade finance, corporate finance, leasing, factoring and the distribution of certain life insurance products through bank branches) throughout Italy, Germany, Austria, Poland and other Eastern and Central European countries. The Group serves its customers through its multi-channel distribution network comprising as at 30 September ,585 branches throughout 22 countries and a network of licensed financial consultants (promotori finanziari) operating in Italy, as well as internet and telephone banking capabilities. At 30 September 2010, the Group had 161,169 (full-time equivalent) employees. HISTORY AND DEVELOPMENT Formation of the Banking Group UniCredit The Group was formed as a result of the October 1998 merger between the Credito Italiano national banking group and the UniCredit regional banking group, formed one year before by a three-way merger in 1997 among Banca Cassa di Risparmio di Torino S.p.A, Cassa di Risparmio di Verona, Vicenza, Belluno e Ancona Banca S.p.A. and Cassamarca-Cassa di Risparmio della Marca Trevigiana S.p.A. Since its formation, the Group has continued to expand in Italy and launched its operations in Eastern Europe through both acquisitions (Bank Pekao in 1999, UniBanka and Bulbank in 2000, Zagrebacka and Demirbank Romania in 2002, Zivnostenska Banka in 2003, KFS in 2002 and Yapi Kredi in 2005) and organic growth. 102

103 In October 2000, UniCredit acquired the Global Investment Management division of the U.S.-based Pioneer Group ( Pioneer ). Following this acquisition, the Group consolidated its asset management businesses under a newly formed holding company named Pioneer Global Asset Management S.p.A. ( PGAM ). From 2005, the Group substantially expanded its international operations, chiefly in Germany, Austria and Central and Eastern Europe, through the business combination with Bayerische Hypound Vereinsbank Aktiengesellschaft ( HVB ). See The Business Combination with the HVB Group below. In December 2006, Bank Austria Creditanstalt AG (which was subsequently renamed UniCredit Bank Austria AG, Bank Austria ) acquired the entire institutional business of the Russian broker Aton Capital, which was one of the top five investment banks in Russia at the time. In January 2007, HVB transferred a per cent. stake in International Bank Moscow (IMB, subsequently renamed Zao UniCredit Bank ) to Bank Austria. Furthermore, between the end of December 2006 and the beginning of January 2007, Bank Austria acquired the stakes of minority shareholders, thereby becoming the sole shareholder of Zao UniCredit Bank, which is one of the top ten Russian banks by total assets. In May 2007, UniCredit s Board of Directors approved the merger of Capitalia S.p.A. into UniCredit, which became effective as of 1 October See The Business Combination with the Capitalia Group, below. In October 2007, PGAM signed a joint venture agreement with Bank of Baroda in India in a major strategic move to extend its presence in one of the world s fastest growing mutual fund markets. In pursuance of this agreement, in 2008 PGAM purchased a 51 per cent. stake in the share capital of BOB Asset Management Company Ltd, which subsequently changed its company name to Baroda Pioneer Asset Management Company Ltd. In November 2007, Bank Austria acquired a 91.8 per cent. stake (later increased to per cent.) in ATF Bank, the third largest bank and largest foreign-owned bank in Kazakhstan, operating through a branch network of 140 branches throughout Kazakhstan, as well as subsidiaries and affiliates in Kazakhstan, Kyrgyzstan, Tajikistan (sold in July 2008) and Russia (Omsk region). In 2007 and 2008, the Group also reorganised its operations in the Central and Eastern European ( CEE ) countries where, as a result of the HVB business combination, it has more than one bank (Slovakia, Bulgaria, Romania, the Czech Republic and Bosnia). In January 2008, Bank Austria finalised the acquisition of 94.2 per cent. (later increased to per cent.) of the total issued share capital of CJSC Ukrsotsbank ( USB ), the fourth largest bank in Ukraine in terms of loans to customers and deposits, listed on the Ukrainian Stock Exchange. In May 2008, the UniCredito Italiano S.p.A. extraordinary shareholders meeting changed the name of the company to UniCredit S.p.A. In September 2008, UniCredit signed an agreement with the Polish Ministry of the State Treasury ( MST ) giving the MST a put option and UniCredit a call option with respect to the shares held by the MST in Bank Pekao, which amount to approximately 3.95 per cent. of the share capital of Bank 103

104 Pekao. The MST could exercise its put option from the date of the agreement to 30 June 2009 while UniCredit had the right to exercise its call option starting on 23 December 2008 until 23 December In December 2008, the MST and UniCredit signed an amendment to the above mentioned agreement. Pursuant to the amendment, the MST and UniCredit agreed to finally waive their respective put and call options with respect to the 3.95 per cent. shareholding in Bank Pekao held by the MST. Between the end of 2008 and the first half of 2009, the centralisation project of Italian and foreign ICT and back office businesses has been implemented in order to improve the coordination and the efficiency of these business support areas and to achieve further economies of scale and scope through the centralisation of all the ICT and back office activities of HVB AG and Bank Austria AG into, respectively, a global back office company (UniCredit Business Partner S.c.p.A.) and a global ICT company (UniCredit Global Information Services S.c.p.A.). In January 2009, mortgages to individuals and consumer credit in Italy were integrated through the incorporation of UniCredit Banca per la Casa S.p.A. into UniCredit Consumer Financing Bank S.p.A. (then redenominated UniCredit Family Financing Bank S.p.A. and, following the implementation of the One4C project, now merged into UniCredit S.p.A.) and a new model for leasing management at the Group level has been realised through the incorporation of UniCredit Global Leasing S.p.A. into Locat S.p.A. (now UniCredit Leasing S.p.A.). In April 2009, Pioneer Investment Management SGR S.p.A. ( PIM SGR ), a wholly owned subsidiary of PGAM, acquired an equity interest of 37.5 per cent. in Torre RE SGRpA (a real estate fund management company under the Fortress Investment Group LLC, which in turn is an alternative management company listed on the New York Stock Exchange) as part of a capital increase of the aforesaid company reserved for PIM SGR and subscribed by the latter through the contribution of its real estate funds business unit. The transaction was carried out as part of a project aimed, inter alia, at creating a partnership with an international major player in the real estate sector. The Business combination with the HVB Group On 12 June 2005, the Group entered into a business combination agreement with HVB (the Business Combination Agreement ) relating to the combination of the Group with the HVB Group, the transaction structure and the future organisational and corporate governance structure of the combined group. At the time of the Business Combination Agreement, HVB owned, inter alia, a 77.5 per cent. stake in Bank Austria and, indirectly through Bank Austria, a 71.2 per cent. stake in Bank BPH S.A., a Polish listed bank ( BPH ). Therefore, the Business Combination Agreement provided for the terms and conditions of three public exchange offers in Germany, Austria and Poland for all outstanding shares of HVB, Bank Austria and BPH. HVB On 26 August 2005, UniCredit published an offer document for the purchase of all of the common shares and for all of the preferred shares of HVB. Upon expiry of all applicable acceptance periods for the offer, UniCredit controlled approximately per cent. of the registered share capital and of the voting rights of HVB. UniCredit s ordinary shares were admitted to listing on the Frankfurt Stock Exchange on 21 November 2005 and on the Warsaw Stock Exchange on 20 December

105 In January 2007, UniCredit initiated procedures to effect the squeeze-out of minority shareholders of HVB. At that time UniCredit held approximately per cent. of the share capital of HVB after having acquired an additional 1.23 per cent. on the market. The squeeze-out of HVB s freefloat shareholders was resolved upon by the bank s shareholders meeting in June 2007 and was registered in the commercial register at the Register Court of Munich on 15 September The squeeze-out price was per HVB share, for a total consideration of approximately 1,396 million. The HVB shares held by the free-float of approximately 4.55 per cent. of the company s share capital were transferred to UniCredit by act of law, and HVB became a wholly-owned subsidiary of UniCredit. On 15 December 2009, Bayerische Hypo- und Vereinsbank AG changed its legal name to UniCredit Bank AG. In the first half of 2010, UniCredit Bank AG acquired the majority of Bank Austria s markets operations carried out by the subsidiary UniCredit CAIB AG. On 1 July 2010, UniCredit CAIB AG was legally merged into UniCredit Bank AG and UniCredit Bank AG started operating in Austria through a newly opened branch in Vienna. Bank Austria On 26 August 2005, UniCredit published an offer document for the purchase of all no-par-value bearer shares and all registered shares of Bank Austria that HVB did not then hold. Upon expiry of all applicable acceptance periods for the offer, the Group reached approximately per cent. of the aggregate share capital of Bank Austria. On 4 August 2006, the Board of Directors of UniCredit and the supervisory board of Bank Austria approved the plan of intra-group transfers of subsidiaries in Central and Eastern Europe, in order to make Bank Austria the sub-holding for Group banking subsidiaries in CEE countries except Poland and Ukraine. Following completion of the contribution in kind, UniCredit s direct and indirect stake in Bank Austria increased from per cent. to per cent. Subsequently, HVB transferred to UniCredit its per cent. stake in Bank Austria and its 100 per cent. participation in HVB Ukraine to Bank Pekao. In January 2007, UniCredit initiated procedures to effect the squeeze-out of minority shareholders of Bank Austria. At that time UniCredit held approximately per cent. of the share capital of Bank Austria. The squeeze-out transaction of Bank Austria was approved by its shareholders meeting on 3 May Subsequently, certain shareholders of Bank Austria challenged this transaction, alleging that the squeeze-out price was not fair and seeking damages. On 21 May 2008, this litigation was settled and the squeeze-out was registered in the Vienna Commercial Register. UniCredit thus paid the minority shareholders a total sum of approximately 1,045 million, including accrued interest, and became the owner of per cent. of Bank Austria s share capital. On 27 September 2009, Bank Austria Creditanstalt AG changed its legal name to UniCredit Bank Austria AG. 105

106 In March 2010, UniCredit Bank Austria AG completed a 2 billion capital increase in order to meet the expectations of the local regulators and the rating agencies, as well as to remain in line with its main Austrian competitors in terms of capital ratios and be well-positioned to take advantage of future economic growth in Austria and Central Eastern Europe. UniCredit subscribed for both the shares to which it had rights and the portion of the capital increase not subscribed for by other shareholders, and accordingly its interest in UniCredit Bank Austria AG rose to per cent. BPH On 20 January 2006, UniCredit communicated to the Polish Securities and Exchange Commission, the Warsaw Stock Exchange and the Polish Press Agency its mandatory public tender offer for the shares (representing per cent. of the share capital) of BPH that UniCredit did not already indirectly own. Upon expiry of the acceptance period, no BPH shares had been tendered in the offer. In November 2006, Bank Austria transferred its per cent. stake in BPH to UniCredit, for allocation to the newly constituted Poland s Markets Division. The long-term objective of the Poland s Markets Division is to maximise the creation of value in the Polish market further to the merger between Bank Pekao and a part of BPH. The partial integration of BPH into Bank Pekao was finalised in November On 17 June 2008, UniCredit transferred an approximate 66 per cent. shareholding in BPH to GE Money Bank, a Polish Bank belonging to the global consumer lending division of General Electric. Prior to the sale, UniCredit held per cent. of the corporate capital of BPH. The transaction also envisaged the sale by CABET Holding, a wholly-owned subsidiary of Bank Austria, of its 49.9 per cent. shareholding in BPH TFI (a wholly-owned subsidiary of BPH operating in the asset management sector) to GE Capital Corporation on 18 June The Business Combination with the Capitalia Group On 20 May 2007, UniCredit s Board of Directors and the Board of Directors of Capitalia S.p.A. ( Capitalia ) approved the merger of Capitalia into UniCredit (the Merger ), which was subsequently approved by the shareholders meetings of both UniCredit and Capitalia on 30 July The Merger was effected by way of incorporation of Capitalia into UniCredit and, as a consequence, Capitalia ceased to exist and all of its assets, rights and obligations have been transferred to UniCredit. Following authorisation by the Bank of Italy in June 2007 and by the Italian Competition Authority in September 2007, UniCredit and Capitalia executed the merger deed on 25 September 2007, and the Merger became effective as of 1 October In 2008, Capitalia s various businesses were brought into line with the UniCredit Group s model through: (i) the reorganisation of the Italian Retail Division into three network banks with specific regional competences; (ii) the transfer of Capitalia s corporate and private banking assets to the corresponding Group banks, which are specialised according to customer segments in line with the divisional Group model; 106

107 (iii) the reorganisation and integration of real estate, IT and back office operations; and (iv) the sale of branches in compliance with the order issued by the Italian Competition Authority upon release of its authorisation of the Merger. The ONE4C Programme In order to satisfy the changed expectations of clients and the needs for territorial proximity that have emerged in the new international banking context, on 13 April 2010 the Board of Directors of UniCredit approved the ONE4C ( One for Clients ) project. In particular, the Board approved the proposed merger by incorporation into UniCredit S.p.A. of UniCredit Banca S.p.A., UniCredit Banca di Roma S.p.A., Banco di Sicilia S.p.A., UniCredit Corporate Banking S.p.A., UniCredit Private Banking S.p.A., UniCredit Family Financing Bank S.p.A. and UniCredit Bancassurance Management & Administration S.c.r.l. The One for Clients project aims to enhance customer satisfaction by simplifying the bank s corporate structure and increasing proximity to the territories and communities served. Similarly to what is already underway in Austria, Germany and Poland, on 13 April 2010 the Board also approved the introduction of a Country Chairman for Italy and appointed to such office Gabriele Piccini (previously CEO of UniCredit Banca and Head of Retail Italy). The One for Clients program strengthened the Group s divisional model in Italy through the creation of four business segments (Families, SMEs, Corporate Banking and Private Banking) and three specialized Italian sales networks dedicated to serving: (a) Roughly eight million individuals (with assets up to 500,000) and one million companies (with annual turnover up to 50 million), comprising the Families and SME segments respectively, through a network of approximately 35,000 employees and 4,000 branches across Italy, organized into 112 sales units coordinated by 10 executive departments. (b) More than 19,000 enterprises (with annual turnover over 50 million), comprising the Corporate Banking segment, through a network of 450 managers coordinated by five directorates. (c) More than 160,000 clients (with assets exceeding 500,000), comprising the Private Banking segment, through a network of 780 managers, led by six departments. Moreover, seven territorial areas were established within Italy with managers serving as reference points for local institutions and stakeholders. On 15 June 2010, pursuant to article 57 of the Banking Act, the Bank of Italy issued the authorisation for the merger. The meeting of the UniCredit Board of Directors of 3 August 2010 approved the merger pursuant to article 2505, paragraph 2, of the Italian civil code and article 23 of the Articles of Association. The deed of merger to bring seven subsidiaries (UniCredit Banca S.p.A., UniCredit Banca di Roma S.p.A., Banco di Sicilia S.p.A., UniCredit Corporate Banking S.p.A., UniCredit Private Banking S.p.A., UniCredit Family Financing Bank S.p.A. and UniCredit Bancassurance Management & 107

108 Administration S.c.r.l.) into UniCredit was signed on 19 October 2010 and became effective as of 1 November After the merger, as well as fulfilling its role as Parent Company, UniCredit also directly engages in banking and commercial activities with clients. THE CURRENT ORGANISATIONAL STRUCTURE UniCredit is the parent company of the Group and, in that role, pursuant to article 61 of the Banking Act, undertakes management and coordination activities in respect of the Group to ensure the fulfilment of requirements laid down by the Bank of Italy in the interest of the Group s stability. The following diagrams illustrate the banking companies controlled by UniCredit belonging to the Group, as at 10 January

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